COMS PLC
Annual Report 2015
Contents
Financial indicators
Chairman’s statement
Strategic report
Directors and officers
Company information and advisers
Directors’ report
Auditor’s report
Consolidated income statement
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
Company statement of financial position
Company statement of cash flows
Company statement of changes in equity
Notes to the financial statements
3
4
6
16
17
18
23
25
26
27
28
29
30
31
32
©2015 Coms PLC | www.comsplc.com
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Financial indicators
Revenue
Growth in revenue
Adjusted (LBITDA)/EBITDA*
Operating (loss)/profit
Total (loss)/profit for the year
Net (overdraft)/cash balances
Consolidated net assets
(Loss)/earnings per share - basic
(Loss)/earnings per share - diluted
2015
£000
45,954
228%
(3,448)
(14,653)
(15,070)
(386)
8,978
(1.57p)
(1.57p)
2014
£000
14,003
763%
1,045
826
1,014
999
15,991
0.24p
0.22p
* Before net finance costs, depreciation, amortisation, integration costs and transactional items, impairment charge and
share based payments.
©2015 Coms PLC | www.comsplc.com
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Chairman’s statement
Dear Shareholder
This past year has proved to be an exceedingly difficult year for the Group. Having
seen rapid change through the previous year and into 2014/15, through a number of
acquisitions, the expectations for the business were high, however, over the course
of the year, and despite several attempts to integrate the telecoms assets which the
Company had acquired, the management team was not able to secure the necessary
anticipated savings.
With the continued poor trading, in addition to the losses which we identified in the
trading update at the end of February, we have also had to recognise the impairment
of most of the goodwill, intangible and fixed assets and certain other assets
associated with the Telephony Services division as none of the investments made
in telecoms assets have generated any value for the Company. The costs associated
with the closure of the Brentwood office have also been recognised as integration
and transactional items. The operating loss before integration and transactional items
and impairment costs amounted to £4.7m and the impairment charges, integration
and transactional items amounted to a further £10.0m of write downs. Further detail
is provided in the Strategic report.
Board matters
Dave Breith resigned as CEO in March 2015 and since his departure the Non-Executive
Directors have been responsible for running the Company, with myself leading
the business and Diana Dyer Bartlett working full-time as interim Chief Financial
Officer. We were also very fortunate to secure the services of Mark Braund and
Guy van Zwanenberg as new Non-Executive Directors in March 2015 at a time when
the Company was facing difficult financial decisions. As announced on 14 July 2015,
Mark Braund has now agreed to be appointed Chief Executive of the Company and
Spencer Dredge will be appointed Chief Financial Officer. Having had the benefit
of working with Mark as a Non-Executive Director, and Spencer as Interim Finance
Director supporting Diana, over the last few months, I am delighted that both Mark
and Spencer are taking over the operational management of the business. I am
confident that, with the Board’s support, the Company’s recent problems will soon be
put behind us.
Dave Breith has intimated to the Company that he is intending to make an
employment claim against the Company. The Board is additionally looking at what
sums are owed to the Group by Mr Breith and companies associated with Mr Breith.
Further information is set out in the Strategic report.
Sale of the Telephony Services division
After a detailed review of the finances of the Telephony Services business, the Board
concluded that the Telephony Services overhead structure was such that it would
take significant further investment and considerable management focus for the
business to achieve profitability. The Company did not have the capital required to
achieve this and, in any case, the risk involved in such a process was such that the
Board did not think it wise to continue with such investment. As a consequence,
a decision was taken to sell the Telephony Services businesses and we announced
the sale of their trade and assets to Timico Limited on 26 May 2015. Timico has
assumed some of the liabilities of the Telephony Services businesses but we are
left to deal with certain other liabilities, in particular, the two leasehold properties
- at Brentwood and Stokenchurch. Further information concerning the disposal is
contained in the Strategic report.
©2015 Coms PLC | www.comsplc.com
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The Group’s future
Following the disposals of the telecoms assets, the Group now comprises Redstone’s
infrastructure business and Darkside Studios. It is the Board’s intention to focus
our efforts on growing our core infrastructure business, Redstone, by developing
our leading Smart Buildings product offering and expanding further our successful
managed services business. The Board intends to capitalise on accelerating growth
in the construction industry and, in particular, the fast growing Smart Buildings sector
where Redstone has already delivered solutions to a number of landmark projects.
The Board believes that there is significant potential in these markets as they go
through both structural and technological change. Redstone is well positioned
to service this opportunity and our focus is to develop this capability through a
combination of product development, organic growth and acquisitions. One of the
new management team’s jobs will be to rebrand the organisation to reflect the focus,
going forward, on Redstone’s business.
To assist the Company in developing this new strategy and to provide some
additional working capital to the business, the Company announced a placing and
open offer on 29 May 2015 which raised £2.0m net of expenses.
The losses incurred by the Telephony Services division continued until the end of
May and, as a consequence, we will report another operating loss for the first half of
2016. However, the Board anticipates that the Group’s trading will improve thereafter.
With additional capital injected into the business, the disposal of all of the Group’s
loss-making businesses and the appointment of a new management team, my Board
colleagues and I are confident that the Group is now better placed to embark on a
more successful period of stability and growth.
I would like to take this opportunity to thank all the staff who have worked tirelessly
to get us through what has been a very difficult period. I would like to thank my
fellow Non-Executive Directors for their support and commitment and those
shareholders who have continued to support us.
Frank Beechinor
Chairman
©2015 Coms PLC | www.comsplc.com
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Strategic report
Strategy, business model, risks and KPIs
Strategy
The focus of Coms Group is based around its Redstone business which aims to be a leader in infrastructure,
Smart Buildings and IT Managed Services. This business is currently based in the UK but has also operated in some
overseas locations to support existing clients. Key priorities to develop Redstone’s business include:
n To maintain Redstone’s reputation as a market leader for service excellence and technical competence in its field.
We will focus on continuing to provide high quality services to Redstone’s clients by employing expert staff who
are well versed in the Company’s products and our clients’ needs and continuing to maintain our multiple ISO
and vendor accreditations.
n To grow the Smart Buildings offering through a combination of organic growth and acquisition.
n To focus on developing technology led intellectual property. The Group has already delivered exciting solutions
in a number of landmark projects and has successfully productised some of its offerings.
n To grow the already successful Managed Services business through a combination of organic growth and, where
possible, acquisition.
n To grow the annuity revenue in the business.
n To deliver improving profitability and cash generation.
Darkside Studios was acquired by the Group with a view to promoting the services which the Telephony Services
business was able to provide to its resellers and thereby assist in growing that business. It currently also undertakes
some internal work for Redstone and the Board will review how best to create value through this business in the coming
months, now that the Telephony Services businesses have been sold.
Business model and risk profile
The Group’s business model is to generate a return by providing an excellent service to its customers primarily in
the UK but also in certain circumstances in overseas locations to support UK clients. Redstone’s business focuses
on higher value added products and services and to this end, it maintains the highest manufacturer accreditations.
Redstone’s main activities are:
Managed Services: Around 45% of Redstone’s revenue is derived from Managed Services. Managed Services
encompasses the provision of outsourcing services spanning network infrastructure management, Smart Buildings
support services, desktop and data centre support services and move, add and change services. Staff are normally
based permanently on a client site. Contracts are generally on a long-term basis which allows services to be tailor-
made and continuity of service in what are key support functions for our clients. Services are generally invoiced
monthly in arrears.
Implementation: This comprises Smart Buildings and Cabling which contributes 55% of Redstone’s revenues.
Smart Buildings, at 6%, is small but has the potential for significant growth. The services range from adhoc intelligent
solutions such as lighting projects to control energy costs to a full holistic integrated platform that offers better
economic, social and environmental performance for buildings and their occupants. Systems incorporated may
include LAN, One Space (Redstone branded desk utilisation and power management system), Energy Management,
BIM, CCTV, ACS, Pull Printing, Cashless vending and intelligent lighting. Cabling involves design and installation
of structured cabling systems and intelligent infrastructure management systems. Cabling has historically been
the mainstay of Redstone’s business and in 2015 accounted for some 49% of its revenue. As with Smart Buildings,
revenue is project based and revenue recognition and invoicing tends to be on a staged basis.
©2015 Coms PLC | www.comsplc.com
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The Group’s business gives rise to various operational risks which are described in the Risk management section below.
KPI’s
There are a number of KPI’s which the Board uses to measure the Group’s progress against the business plan:
n Growth in revenue and gross margin performance
n Proportion of revenue which is recurring income
n EBITDA
n Cashflow generated by operations and by the Group as well as the net cash/overdraft position.
The KPI’s above are discussed in the Strategic report.
Risk management
The senior management is responsible for managing risk and assessing how this might prevent the Company from delivering
its strategy. During 2014/15, the Board requested the production of a risk matrix by senior management to ensure that all
material risks had been identified and were being managed. This exercise was not completed during the last financial year
but has since been completed by the Non-Executive Directors with the assistance of Redstone management. The key
risks faced by the Group will continue to be reviewed at Board level in future to ensure risk management is monitored and
implemented effectively. The policy is to identify the key risks which could affect the Group and to assess the appropriate
mitigation, including use of insurance policies.
The Group could potentially be affected by a number of uncertainties and risks that are not wholly within its control.
Some of the key risks and uncertainties are as follows:
n Potential deterioration of the UK economy
n Regulatory changes
n Maintaining and ensuring that the Group continues to attract and retain the right calibre of staff
n Controlling projects within their budgets including delivering the services in accordance with the project specifications
and to the required standards
n Maintaining ISO and vendor accreditations
n Maintaining robust health and safety procedures to safeguard staff and clients
n Maintaining proper accounting and fiscal records to ensure the business is properly controlled
n Managing the Group’s working capital requirements on big construction projects.
©2015 Coms PLC | www.comsplc.com
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Operational review
The Coms Group now comprises Redstone and Darkside Studios, each of which developed their respective businesses
during the course of the year ended 31 January 2015, referred to throughout this report as financial year 2015 or 2015.
An overview of the Telephony Services business and the reasons why it was unable to stem its losses and was sold
is also set out below.
Redstone
Redstone had a busy year in its first year of Group ownership and saw considerable investment by the Group both in
terms of specialist cable testing equipment and fitting out the new office to which it relocated in June 2014 (which it
shares with Darkside Studios). Despite the uncertainties surrounding the Group as a result of the trading difficulties in the
Telephony Services business, Redstone nevertheless made creditable progress in securing new contracts. Below are just
a few of the contracts won in 2015 which give a flavour of both scale and breadth of Redstone’s product offering:
n February 2014: £1.5 million contract for the design, and delivery of an integrated building for a leading insurer;
n March 2014: £0.8m contract with a leading university for the design, and delivery of a new mission critical data centre;
n April 2014: £1.1m contract to deliver structured cabling for a major sporting venue;
n May 2014: £0.5m contract to deliver structured cabling for a leading online retailer across Europe;
n June 2014: £6.0m 3 year contract with a major international financial services client to provide managed services across
critical IT infrastructure throughout the UK;
n August 2014: £0.5m contract to deliver ICT services to a major commercial property company;
n November 2014: £1.8m contract with a leading international financial services client for the design, and delivery
of a new mission critical data centre;
n January 2015: £0.8m one year contract with a major petroleum client to provide managed services across
IT infrastructure throughout the UK.
The Smart Buildings offering in 2015 was slow to develop but towards the end of the year, a large contract was secured
which will be implemented during 2016. This landmark project will no doubt help Redstone market further Smart
Buildings projects.
Darkside Studios
With its motto of “Come over to the Darkside”, Darkside is a world-class animation studio, producing beautifully crafted,
computer generated, moving imagery. Character animation is the studio’s main specialism and the business has talented
animators creating a wide range of CGI, 3D and 2D animation projects for cinema, television and corporate clients,
working for, amongst others, the BBC, Sky and Disney.
Having been acquired in December 2013 as part of a strategy to work with Coms’ telecoms reseller customers to promote
the Telephony Services business, Darkside Studios has re-established its market and towards the end of the year secured
some substantial external contracts with TV and corporate clients and built a pipeline of new business.
©2015 Coms PLC | www.comsplc.com
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Telephony Services
The division’s story for 2015 is one of unfulfilled promise. Fundamentally there was investment in infrastructure predicated
on a much larger business, which the division was unable to support. Much of this investment was undertaken in the 2014
financial year but the problems were further exacerbated during 2015. The Group invested a significant amount of capital
in the division, nearly all of which will be written off in connection with the sale of the division’s business and assets to
Timico. The impairment charges, integration costs and transactional items in 2015 totalled some £10.0m.
The Telephony Services division comprised three main elements:
n An Indirect channel which provided services to wholesale telecoms distributors and resellers largely supplying small
businesses. It also included Premium O which was a business supplying non-geographic and premium numbers to
business users;
n The Direct channel, created with the acquisition of the Actimax companies in February 2014, serving larger corporates
directly; and
n A Mobile offering which had a variety of product delivery channels including retail and “MVNO” whereby Coms
Mobile was a mobile operator rather than a supplier.
The Indirect channel was part of the original Coms business and although it grew its revenues by 444% per cent in 2015,
it nevertheless lacked the scale to cover its overheads. This was exacerbated by the investments in financial year 2014 on
a new broadband network.
The Direct channel was formed in February 2014 following the acquisition of the Actimax companies from administrators
for a cash consideration of £2.4m. The £1.0m contingent consideration payable in respect of the following twelve months’
trading, was not paid as the business did not meet its targets. Having emerged from administration, Actimax had suffered
from a period of instability and it suffered considerable attrition in its customer base soon after acquisition. However,
this stabilised in the second half until the announcement of the restructuring and closure of the Brentwood office in
early 2015. The business had an impressive client base of medium sized companies for whom it provided and maintained
VOIP phone systems.
Having acquired Actimax, the Board expected there to be a consolidation of the Telephony Services division’s business
to reduce costs. However, management was of the view that this was not appropriate, given the different nature of
the Direct and Indirect channels. As a consequence, management relocated the Actimax business to a new office in
Brentwood in April 2014, closing the business’s existing offices. A ten year lease was taken out on the Brentwood office
along with investment of capital expenditure of £0.3m. With the restructuring and closure announced in January 2015,
this investment was impaired.
At the same time as the new Brentwood offices were being taken on, management also signed a 5 year lease on an
office in Stokenchurch. This building was, with hindsight, too large for the business at this stage of its development and
although it had always been expected that acquisitions of further businesses would be made, there was no certainty that
they would have needed new offices. The offices were in good order but a further £0.2m was invested in furniture and
setting up a specialist facility to facilitate the testing of equipment to be installed by Redstone at customer sites. Along
with the Brentwood property this lease also needs to be disposed of, once Timico have relocated the Telephony Services
business to their own facilities.
©2015 Coms PLC | www.comsplc.com
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In addition to setting up offices in preparation for expansion, the Group also established telecoms infrastructure to
handle large volumes of business. In anticipation of securing what was hoped would be a significant trading relationship
with MITIE, a new broadband network was built. A relationship was entered into with TFM Networks in June 2013 to
provide a network capable of handling 20,000 users with the capability of expanding this to 250,000 users. As part of this
relationship, an asset purchase agreement was signed and £0.5m shares issued to fund the purchase of equipment as the
basis for the network. In addition, Dave Breith transferred a further £0.2m assets to the Group in consideration for which
6.7m shares were issued to him. These additional network assets were to provide a third line of resilience to cope with
expected very large volumes of business. There is currently a dispute with TFM Networks as to whether title to the assets
passed to the Telephony Services division at the time that they were paid for or whether a multi-year support contract
(which was never signed) with TFM Networks had to be completed before the Group was entitled to the assets for
which it had expended over £0.5m. Since installation of the network, the Group incurred charges totalling £1.2m with TFM
Networks relating to the network. Because there were only 5,000 users on the network, this is one of the reasons why
the division was unable to achieve profitability. Broadband customers which had generated a profit for the business while
being managed on a smaller platform, generated losses as soon as the new platform was set up. The anticipated MITIE
business never materialised and indeed the total revenue generated by that relationship amounted to £51,000. The Group
paid an introduction fee of £0.2m
plus VAT in May 2013 to an intermediary in connection with the MITIE contract and accordingly steps are to be taken
to recover this money.
The Mobile business had a variety of product offerings encompassing a wide range of different markets. Before the sale
of its trade and assets to Timico, this business focused on developing as a mobile operator, using one of the national
networks. Although it had formed relationships with a number of prospective customers, the pricing was such that
no customer contracts could be signed until a new supplier agreement had been signed with the network operator,
as existing supplier agreements would have resulted in considerable losses. The proposed new network contract had
onerous guarantees and commitments and as such the Board concluded that it could not be signed in light of the trading
difficulties in the Telephony Services division. As a consequence, this division, in the absence of the new contract with
the network operator, would not have been viable. In total Coms invested over £1.0m in the Mobile business including
funding losses and acquiring businesses to give it scale. Most of this investment has been written off following the
disposal to Timico.
The sale of the business and assets of all of the Telephony Services subsidiaries to Timico Limited at the end of May 2015
brings to a close the Group’s activities in the telecoms sector. The Group is left to wind up the operating companies and
deal with the property leases and certain other liabilities. Nevertheless, in the circumstances, the sale represents a good
solution for the Group’s stakeholders, including its customers, suppliers and staff.
Disputes and potential litigation
The Company has been notified of a number of potential claims and disputes, all of which relate to the Telephony Services
division. The Board has considered the basis for these claims and made provision, where appropriate, for such sums, if any,
which it believes might be payable.
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Outstanding issues between the Company and Dave Breith and companies
associated with Dave Breith
There are a number of unresolved issues between the Company and its former CEO, Dave Breith and between the
Company and parties associated with Mr Breith, which the Company is attempting to resolve. In this context “Company”
includes the parent company and any of the Company’s subsidiaries. The outstanding issues include:
n An employment related claim threatened by Mr Breith, which the Company disputes.
n A further claim for payments under a consultancy agreement, offered to Mr Breith by the Company, the terms of which
were not agreed & no material work has been completed, although the Company did pay Mr Breith the first monthly
payment of £20,000 under the draft agreement.
n A claim by Mr Breith in respect of office furniture and equipment, which he claims are his personal property.
n A claim by Blabbermouth Marketing Limited, a company in which Mr Breith is believed to have a minority shareholding,
claiming monies under a terminated contract.
n A claim by Mr Breith in relation to the payment of a deposit to the Company made by Sugar Cube Animation, a company
in which Mr Breith is believed to be a shareholder, in connection with an ongoing project for Sugar Cube Animation.
n A claim by the Company relating to payments made to develop the AskMerlin Telephony Services billing platform
understood to be owned by Mr Breith.
n A claim by the Company to recover moneys from The Payment Centre, a company of which Mr Breith is the
chief executive. The Payment Centre has withheld moneys collected on the Company’s behalf from Telephony
Services customers.
n A claim by the Company seeking repayment of moneys expended on Mr Breith’s car.
The Board believes the settlement of the above issues will result in moneys being recovered by the Company of
approximately £0.1m.
Financial review
Set out below is an overview of the trading results for the year ended 31 January 2015, This includes the results of the
Telephony Services companies whose business and assets were sold at the end of May 2015, following continuing losses
throughout the period under review.
Revenue and gross margin
The revenue and gross margin generated by the Group’s three principal activities was as follows:
Revenue
Redstone
Darkside Studios
Telephony Services
Gross contribution
Redstone
Darkside Studios
Telephony Services
©2015 Coms PLC | www.comsplc.com
2015
£000
29,468
1,099
15,387
45,954
5,158
463
3,300
8,921
%
27.9
35.0
42.1
34.0
%
17.5
42.1
21.4
19.4
2014
£000
8,020
60
5,923
14,003
2,241
21
2,493
4,755
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Redstone
Redstone was acquired in November 2013 and accordingly only three months trading were included in 2014. Redstone’s
2014 results also benefited from the reversal of provisions made on amounts recoverable on contracts which were
deemed to be at risk at the time of Redstone’s acquisition. This resulted in an improvement in the gross contribution
of £0.6m, equivalent to 8 percentage points. Excluding this adjustment, Redstone’s gross margin for 2014 would have been
20.5%. During 2015 one of the matters for which the provision was released in 2014 was not resolved as management had
anticipated, and as result a charge of £0.2m in relation to a pre-acquisition contract was made. Year on year there is a
small decline in gross margin which is attributable to a higher proportion of revenue being generated by the lower value
added cabling installation projects and the charge in relation to the pre-acquisition contract.
Darkside Studios
Darkside Studios was acquired in December 2013 and accordingly only one month’s trading results are included in the
comparative information. Darkside is a high value added business which enjoys higher gross margins than other parts of
the business. However, it also has to invest significant funds in IT and studio equipment to stay at the cutting edge of its
industry. As reported in the Operational review, the business was originally acquired to supply services primarily to Coms’
customers but this strategy was changed midway through the year. Although Darkside Studios reported a creditable
revenue and gross margin performance, at the operating level it produced a small profit of £0.1m. This was largely thanks
to overheads taken on to refocus the business on external sales. It has, nevertheless, built a solid pipeline of new business
which, it is hoped, will allow Darkside Studios to generate an improved operating profit in 2016.
Telephony Services
The Telephony Services division revenue in financial year 2015 developed through a combination of organic growth
and acquisition. In 2015 two new businesses were acquired: the Actimax companies were acquired in February 2014 and
contributed £8.2m to revenue and Smarter Mobile UK was acquired in March 2014 and contributed £0.1m to revenue.
The divisional margin was impacted by the exceptionally low margin Coms Carrier business referred to below, the costs
associated with the new networks acquired during financial year 2014 but only operational in financial year 2015 (and
which led to a gross loss on the broadband activities of £0.2m compared with a gross contribution of £0.2m in 2014).
Premium O’s profitability also declined significantly in 2015, as reported below. Actimax margins were lower than the
divisional reported margins in 2014, thus also contributing to the decline in gross margins as a percentage of revenue.
Mobile’s results include £1.2m revenue generated by the Coms Carrier Services business which the Group commenced
in October 2014. This was a new business and Coms Carrier Services was identified as an immediate problem. Although
it was expected to generate a very low gross margin of some 3%, it involved some unanticipated risks and operational
problems which meant that it lost approximately £0.1m in the brief time that it operated. This business was terminated
at the end of November 2014.
Premium O, which was acquired in May 2013, had a poor year. Having generated revenue of £3.0m in the 8 months post
its acquisition in financial year 2014 (a run rate of some £4.5m per annum), its revenue dropped to £1.6m for the year to
31 January 2015 and its gross margin fell from 34% in 2014 to 19% in 2015. This trend continued into financial year 2016 such
that in the last month before the business was sold, its revenue was less than £20,000. Income from non-geographic
numbers is variable but this business was never integrated into the Group which contributed to its poor performance.
Operating costs
As reported in the Operational review, although there were cost reductions, there was little or no integration of any of
the Group’s businesses during 2015 and accordingly limited cost savings on overheads were secured following the various
acquisitions. Overheads as a percentage of revenue amounted to 26% in 2015 compared with 28% in 2014, although 2014
benefited from the profit on sale of fixed assets so 2014 overheads were actually running at 30% of revenue. The 2015
operating costs included £0.9m costs associated with the offices occupied by the Telephony Services division and as
reported in the Operational review above, the Group now needs to exit the leases on the Telephony Services offices.
They also included £0.5m charges in relation to the broadband network (2014: £0.1m).
©2015 Coms PLC | www.comsplc.com
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Depreciation and amortisation
The charges for depreciation and amortisation, together £1.2m (2014: £0.3m) were the result of the significant investments
made in 2014 and 2015 on leasehold improvements, Redstone’s specialist testing equipment as well as the intangible
assets acquired with the Actimax companies. In addition to these in-use charges, the Company impaired a substantial
proportion of the investments in the Telephony Services division made in 2014 and 2015 (other than the Actimax
intangible asset).
Net finance costs
The net finance costs for the year of £0.2m (2014: £0.4m net income) comprised interest which accrued on utilisation
of the Group’s bank facilities and the unwinding of the discount related to the deferred consideration on the acquisition
of Redstone. In 2014 the net income related to the release of an accrual held in Redstone’s balance sheet on acquisition
in respect of interest owed to former affiliated companies.
Integration costs, transactional items and impairment
charges
The following integration costs, transactional items and impairment charges have been recognised in the 2015
financial statements:
Integration and transactional items
Integration costs
Transactional items
Impairment charges
Goodwill
Other intangible assets
Property, plant and equipment
2015
£000
2,252
(977)
1,275
6,907
1,360
416
8,683
Integration costs: During 2015, as previously reported, the Group carried out some cost reduction initiatives in the
Telephony Services division following the various acquisitions. This initially largely involved consolidating management
of the various businesses and culminated in January 2015 with the announcement of the proposed closure of the
Brentwood office. The integration costs include the redundancy costs associated with these exercises and provisions
for onerous contracts.
Transactional items: Included within transactional items is a £1.0m gain recognised in the Consolidated income statement
relating to the release of the provision for contingent consideration in relation of the acquisition of the Actimax
companies. The expectation that no performance related contingent consideration would be payable in relation to the
Actimax companies was reported at the interim stage and confirmed following completion of the performance period
at the end of February 2015.
©2015 Coms PLC | www.comsplc.com
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Impairment charges
There were a number of impairment charges in 2015, all of which related to the Telephony Services division.
Goodwill: The Group had goodwill balances at the prior year end of £12.9m. During the year following the acquisition of
the Actimax companies and Smarter Mobile UK the Group added £3.7m of goodwill. At the year end the Group recorded
a £6.9m impairment charge as a consequence of the performance of the Telephony Services division.
Other intangible assets: Included on the Group balance sheet were the following intangible assets:
n Database and customers of World Telecom, acquired from Dave Breith for £50,000 in February 2013
n Network assets of £480,000 acquired from TFM Networks Limited in June 2013
n Other network assets amounting to £200,000 acquired from Dave Breith in June 2013
n ADSL broadband customer base acquired in May 2013 from So Purple Limited for a consideration of £800,000
At the year end, the Board concluded that none of these assets would generate any value for the Group and agreed
that they should all be written down to nil.
Property, plant & equipment: As reported in the Operational review, management took out leases on new offices for
the Telephony Services division and incurred £0.4m in leasehold improvements and furniture and fittings. Some of this
expenditure was depreciated during the course of 2015 and a £0.4m impairment charge was recorded in light of the
proposed closure of these offices.
Taxation
The losses incurred by the Telephony Services division have been available to relieve any profits made by Redstone and
Darkside Studios. As a consequence, there is no corporation tax charge in respect of 2015 (2014: £0.1m). Redstone has the
benefit of brought forward trading losses in its ICT business amounting to approximately £7.0m which will be available to
relieve future profits in that business. Although the Telephony Services division had substantial losses brought forward,
all of these will be lost following the sale of the business and assets of the Telephony Services division to Timico.
The £0.3m taxation charge in 2015 (2014: £0.2m credit) related to the reversal of a deferred tax asset in the Mobile business
which related to trading losses which will also not be utilised.
©2015 Coms PLC | www.comsplc.com
14
Cash flow statement
During the year the Group had a net outflow of £1.4m (2014: £0.8m inflow) giving rise to a net overdraft at the end of
the year of £0.4m (2014: net cash of £1.0m). The £1.0m brought forward balance plus £8.0m of cash raised from share issues
was spent on funding operations (£3.4m) and investing in subsidiary companies and fixed assets (£5.9m).
The Loss before tax of £14.9m (2014: profit of £1.2m) translated into an operational cash outflow of £3.4m (2014: £0.4m). Some
£8.7m of the 2015 operating loss related to the impairment of assets in the Telephony Services division prior to its sale to
Timico in May 2015 and accordingly this did not relate to the movement of cash. Similarly in 2014, there were a number of
fair value adjustments and provision unwinds which did not involve cash. The operating cash outflow therefore reflects the
fact that the Group was trading at a loss in both years.
During the year, the Group spent £5.9m cash in acquiring businesses and fixed assets. Some £2.2m was spent on property,
plant and equipment, £0.4m of which related to fitting out the offices in Stokenchurch and Brentwood which have now
been impaired following the sale of the business and assets of the Telephony Services division. £1.1m was also spent on
leasehold improvements, furnishings and office equipment in Redstone’s new Holborn office and £0.7m replacing specialist
testing equipment used by Redstone.
Approximately £3.8m cash (net of cash acquired) was also expended on the acquisition of Actimax, Smarter Mobile UK
Limited and deferred consideration in respect of Redstone. With regard to Redstone, the sum due had been £1.8m but
this was reduced to £1.6m by settling the sums due early and by settling a number of potential claims. A further £0.2m
deferred cash consideration in respect of Redstone is due to be settled in 2016.
The share issues comprised:
n The placing of 138,333,333 shares at 6p per share at the time of the acquisition of the Actimax companies raising £7.9m
net of expenses in February 2014; and
n 13,130,952 shares in relation to the exercise of warrants and share options which raised £0.1m.
Diana Dyer Bartlett
Director
31 July 2015
©2015 Coms PLC | www.comsplc.com
15
Directors and officers
Frank Beechinor (Chairman)
Frank was appointed Chairman of the Board on 11 July 2014 and is Chairman of the Nominations Committee. He has
significant corporate experience, particularly of IT and Software services and is also currently Non-Executive Chairman
of dotDigital Group plc and CEO of Cadence Performance Limited. Frank was previously founder and CEO of OneClick
HR plc from 1997 to 2011.
Diana Dyer Bartlett (Non-Executive Director, acting Chief Financial Officer and
Company Secretary)
Diana was appointed to the Board in October 2013 and is a member of the Audit and Nominations Committees.
With 30 years’ experience in accountancy, investment banking and finance, Diana has an impressive track record in
investments, mergers and acquisitions, corporate governance and business transformation in publicly quoted, venture
capital and private equity backed companies. Her recent roles include Company Secretary for Tullett Prebon plc,
Finance Director of Pelamis Wave Power Limited and Chairman and Honorary Treasurer for BreastCancer Haven.
Diana is an Associate of the Institute of Chartered Accountants in England and Wales.
Mark Braund (Non-Executive Director)
Mark joined the Board on 9 March 2015 and is Chairman of the Remuneration Committee and a member of the Audit
Committee and the Nominations Committee. He is a former director of IBM (EMEA) and an experienced technology
and business services executive with a proven ability to turn around and grow businesses. He founded, developed
and then sold Barker Personnel Services to Carlisle Holdings plc and subsequently led the turnarounds of TAC Europe,
Lorien plc and First Advantage Inc., all of which saw rapid increases in market share and profitability before being sold
to private investors.
Mark joined InterQuest Group plc as Chief Executive Officer in April 2011; since then he has transformed the Company
into one of the leading digital technology contract services and recruitment specialists in the UK.
Guy van Zwanenberg (Non-Executive Director)
Guy joined the Board on 9 March 2015 and is Chairman of the Audit Committee and a member of the Remuneration
Committee and the Nominations Committee. Guy has 40 years’ experience in industry and practice. He qualified as a
Chartered Accountant with Grant Thornton and then spent three years working with James Gulliver. Guy subsequently
moved to become UK Finance Director of an American computer accessory company which was taken public in 1989.
In 1991, he established his own interim financial management business and has since been involved in a number of
SME businesses providing strategic and financial help.
Guy joined Gamingking PLC in 1998 on a part time basis as Finance Director and became Company Secretary and
Non-Executive Director in 2006, remaining until May 2013. He joined Quixant plc as a Non-Executive in March 2013
as part of the float team.
Guy is both a Fellow of The Institute of Chartered Accountants in England and Wales and a Chartered Director.
©2015 Coms PLC | www.comsplc.com
16
Company information and advisers
Registered office
Beacon House
Stokenchurch Business Park
Ibstone Road
Stokenchurch
Buckinghamshire
HP14 3FE
Coms plc Company Number
5332126
Company advisers
Nominated adviser and broker
Charles Stanley
131 Finsbury Square
London
EC2A 1NT
Auditors
KPMG LLP
Chartered Accountants & Statutory Auditors
Arlington Business Park
Theale
Reading
Berkshire
RG7 4SD
Registrars
Share Registrars Ltd
Craven House
West Street
Farnham
Surrey
GU9 7EN
Bankers
Barclays Bank plc
1 Churchill Place
London
E14 5HP
©2015 Coms PLC | www.comsplc.com
17
Directors’ report
The Directors submit this report together with the accounts of Coms plc (‘the Company’) and its subsidiary undertakings
(together ‘the Group’) for the year ended 31 January 2015.
Principal activities
During the year the Group’s principal activities were infrastructure services (Redstone), animation and CGI special effects
services provided by Darkside Studios and the development and commercialisation of telecommunication services. In
May 2015 the Company announced that it had sold the business and assets of all of its telecommunication subsidiaries
and accordingly the Group now comprises Redstone and Darkside Studios.
Results and dividend
The results for the year are set out in the Consolidated income statement on page 25. The Directors do not recommend
payment of a dividend (2014: nil).
Review of the business
A review of the business of the Group, together with comments on future developments is given in the Strategic report.
Directors and their interests
The Directors who held office during the year were as follows:
Frank Beechinor
Dave Breith
Diana Dyer Bartlett
Stephen Foster
Iain Ross
Sue Alexander
Graham Herring
Chairman (appointed 11 July 2014)
Chief Executive Officer (resigned 1 March 2015)
Non-Executive Director, currently acting Chief Financial Officer
Non-Executive Director (resigned 29 May 2015)
Chairman (resigned 11 July 2014)
Finance Director (resigned 11 July 2014)
Non-Executive Director (resigned 16 April 2014)
Since the year end Mark Braund and Guy van Zwanenberg were appointed Directors of the Company on 9 March 2015.
On 14 July 2015, it was further announced that Mark Braund would be appointed Chief Executive of the Company as soon
as he could leave his current executive role and that Spencer Dredge had been appointed Chief Financial Officer.
The remuneration of the Directors who held office during the year was as follows:
Directors’ remuneration
Share based payment charge
Frank Beechinor (1)
Dave Breith
Diana Dyer Bartlett
Stephen Foster
Iain Ross (2)
Sue Alexander (2)
Graham Herring (3)
(1) Appointed 11 July 2014
(2) Resigned 11 July 2014
(3) Resigned 16 April 2014
©2015 Coms PLC | www.comsplc.com
2015
£
30,000
190,000
71,500
45,800
109,400
33,333
7,250
2014
£
-
200,769
7,414
61,996
39,000
53,333
8,333
2015
£
126
1,921
4,041
31
126
1,921
(4,041)
2014
£
-
1,921
4,041
31
1,211
3,010
4,041
18
The interests of those Directors serving during the year ended 31 January 2015, as at the year end or the date of
resignation, all of which are beneficial, in the share capital of the Company, were as follows:
Director
Frank Beechinor (1)
Dave Breith
Diana Dyer Bartlett
Sue Alexander (2)
Iain Ross (2)
Stephen Foster
Graham Herring (3)
(1) Appointed 11 July 2014
(2) Resigned 11 July 2014
(3) Resigned 16 April 2014
Ordinary shares of 0.1p each
2015
No.
-
2014
No.
-
138,876,454
138,856,455
-
-
-
-
2,331,550
2,331,550
-
-
-
-
Since the year end Frank Beechinor and Diana Dyer Bartlett subscribed for 9,000,000 shares and 4,000,000 shares
respectively in the placing undertaken on 29 May 2015. Mark Braund and Guy van Zwanenberg, who were appointed as
Directors since the year end, also subscribed for 4,000,000 and 3,000,000 ordinary shares in the placing and open offer of
29 May 2015. Dave Breith has notified the Company that he no longer holds a notifiable interest in the Company’s shares.
The beneficial holdings include, where applicable, the holdings of connected parties.
Directors’ share warrants and options
As at 31 January 2015 the Company had granted the following warrants and share options to Directors and past Directors
of the Company which remained outstanding at the year end or at the date of resignation:
Director
Frank Beechinor
Dave Breith
Diana Dyer Bartlett
Stephen Foster
Iain Ross
Instrument
Warrant
Warrant
Share option
Warrant
Warrant
Warrant
Warrant
Sue Alexander
Share option
Number of ordinary
shares of 0.1p each
Exercise price
Grant date
1,000,000
3,000,000
4,000,000
2,000,000
1,000,000
2,380,952
4,000,000
4,000,000
6p
7p
10/07/2014
10/07/2014
0.825p
20/03/2013
5p
5p
0.84p
5p
0.825p
30/09/2013
10/06/2013
25/02/2013
10/06/2013
20/03/2013
Mr Ross exercised a warrant granted to him subsequent to his resignation over 2,380,952 ordinary shares at an exercise
price of 0.84p per share in November 2014.
None of the Directors had any beneficial interest in the shares of any subsidiary companies.
©2015 Coms PLC | www.comsplc.com
19
Share capital
Details of the Company’s share capital are disclosed in note 22 to the financial statements.
Financial instruments
Details of the use of financial instruments by the Company and its subsidiary undertakings are disclosed in note 26 to the
financial statements.
Statement to auditor
So far as the Directors are aware, there is no relevant audit information (as defined by section 418 of the Companies Act
2006) of which the Company’s auditor is unaware, and each Director has taken all the steps that he/she ought to have
taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the
Company’s auditor is aware of that information.
Corporate governance
Achieving good governance is key to the long term success of the business. It ensures we remain a responsible Company
and underpins our culture and reputation as an organisation. As a Board we are conscious of our obligations to think
deeply, thoroughly and on a continuing basis regarding our duties.
Coms plc has Non-Executive Board members with extensive experience in areas critical to the long term future success
of the Company, covering a deep understanding of technology, corporate strategy, finance and investment.
This experience enables the Non-Executives to add entrepreneurial leadership, with open and rigorous debate that
provides a valuable external and balanced perspective to the proceedings. We believe that our Board complement each
other, delivering a broad and appropriate balance of skills.
In the absence of a Chief Executive and Finance Director, Frank Beechinor and Diana Dyer Bartlett have been required to
take on responsibility for the leadership of the business and oversight of its finances until the new senior management
take office, after which time both Directors will resume their more normal duties.
Board of Directors
At the year end the Board consisted of a Chairman, Chief Executive and two Non-Executive Directors. Since the
year end the Board has consisted of a Chairman and three Non-Executive Directors, although Diana Dyer Bartlett has
assumed executive responsibility on an interim basis. Once the new Chief Executive and Chief Financial Officer take up
their appointments it is expected that the Board will comprise a Chairman, two Executive Directors and two
Non-Executive Directors.
The Board meets on a regular basis and the agenda of matters discussed and approved consists of matters concerned
with the future direction of the business.
Remuneration Committee
The Remuneration Committee agrees the terms and conditions, including annual remuneration, of Executive Directors
and reviews such matters for other senior personnel including their participation in long term incentive schemes.
Audit Committee
The Audit Committee recommends the appointment, scope and fees of the external auditor, discusses issues that arise
from the audit, reviews reports of the external auditors and internal control procedures and considers any financial
statements before their publication. The auditor also attends meetings of the Audit Committee as required by the
Committee to consider any issues arising from the audit and their work.
Nominations Committee
The Nominations Committee makes recommendations to the Board for all Board appointments and succession planning.
©2015 Coms PLC | www.comsplc.com
20
Employees
The Group has continued to give full and fair consideration to applications made by disabled persons, having regard
to their respective aptitudes and abilities, and to ensure that they benefit from training and career development
programmes in common with all employees. The Group has continued its policy of employee involvement by making
information available to employees through the medium of frequent staff meetings, together with personal appraisals
and feedback sessions.
Share options
The Company’s policy is to reward and provide long-term incentives to employees by granting them share options.
Substantial shareholdings
As at the year end and 29 July 2015, being the latest practicable date before the signing of these accounts, the following
interests in 3% or more of the issued ordinary share capital had been notified to the Company:
Shareholder
Dave Breith
Helium Special Situations Fund
31 January 2015
29 July 2015
138,876,454
87,025,000
14.3%
8.9%
N/A
177,025,000
N/A
12.7%
Post balance sheet events
On 26 May 2015 the Company announced that it had agreed to sell the business and assets of all its Telephony Services
companies to Timico Limited for an initial cash consideration of £2.5m, with a further payment of up to £1.0m depending
on performance in the period to 30 November 2015.
Further details of post-balance sheet events are disclosed in note 28 to the financial statements.
On 29 May 2015 the Company announced a placing and open offer of ordinary shares at 0.5p per share. The open offer
was oversubscribed by 50% and the gross proceeds received by the Company amounted to £2.1m.
Directors’ responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements, the Directors’ report in
accordance with applicable law and regulations.
Company law requires the Directors to prepare group and parent company financial statements for each financial year.
Under that law they have elected to prepare both the group and the parent company financial statements in accordance
with IFRSs as adopted by the EU and applicable law. As required by the AIM Rules of the London Stock Exchange they are
required to prepare the group financial statements in accordance with IFRSs as adopted by the EU and applicable law and
have elected to prepare the parent company financial statements on the same basis.
Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the group and parent company and of their profit or loss. In preparing each of
the group and parent company financial statements, the Directors are required to:
n select suitable accounting policies and then apply them consistently;
n make judgements and estimates that are reasonable and prudent;
n state whether they have been prepared in accordance with IFRSs as adopted by the EU; and
n prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company
will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent
company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company
and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general
responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent
and detect fraud and other irregularities.
©2015 Coms PLC | www.comsplc.com
21
The directors are responsible for the maintenance and integrity of the corporate and financial information included on
the company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Listing
The Company’s ordinary shares have been traded on London’s AIM Market since 6 September 2006. Charles Stanley
are the Company’s Nominated Advisor and Broker. The closing mid-market share price at 31 January 2015 was 0.52p
(31 January 2014: 9.5p).
Publication of financial statements
The Company’s financial statements will be made available on the Company’s website www.comsplc.com. The
maintenance and integrity of the website is the responsibility of the Directors. The Directors’ responsibility also extends
to the financial statements contained therein.
Going concern
The Group’s business activities and performance, and the financial position of the Group, its cash flows and borrowing
facilities, together with the factors likely to affect its future development, performance and position, are explained in the
Strategic report. Analysis of the Group’s key risks is also set out in the Strategic report. Further information regarding the
assessment of going concern is in note 1 to the financial statements.
After making appropriate enquiries, the Directors consider that the Company and the Group have adequate resources to
continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern
basis in preparing the financial statements.
Auditor
In accordance with section 485 of the Companies Act 2006, a resolution proposing that KPMG LLP be re-appointed as
auditor will be put to the Annual General Meeting.
The Report of the Directors was approved by the Board on 31 July 2015 and signed on its behalf by:
Diana Dyer Bartlett
Director
31 July 2015
©2015 Coms PLC | www.comsplc.com
22
Auditor’s report
Independent Auditor’s report to the Members of Coms Plc
We have audited the financial statements of Coms Plc for the year ended 31 January 2015 set out on pages 25 to 58.
The financial reporting framework that has been applied in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the EU 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 Directors’ Responsibilities Statement set out on page 21, 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). Those standards require us to comply with the Auditing Practices Board’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 Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
n 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 31 January 2015 and of the group’s loss for the year then ended;
n the group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;
n the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU
and as applied in accordance with the provisions of the Companies Act 2006; and
n 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 Strategic report and the Directors’ report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
©2015 Coms PLC | www.comsplc.com
23
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:
n 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
n the parent company financial statements are not in agreement with the accounting records and returns; or
n certain disclosures of directors’ remuneration specified by law are not made; or
n we have not received all the information and explanations we require for our audit.
Derek McAllan
(Senior Statutory Auditor)
for and on behalf of KPMG LLP
Chartered Accountants & Statutory Auditors
Arlington Business Park
Theale
Reading
Berkshire
RG7 4SD
31 July 2015
©2015 Coms PLC | www.comsplc.com
24
Consolidated income statement
For the year ended 31 January 2015
Revenue
Cost of sales
Gross profit
Administrative expenses
Adjusted (LBITDA)/EBITDA*
Integration and transactional costs included within administrative expenses
Depreciation
Amortisation
Share based payment charge
Impairment charge
Operating (loss)/profit
Net finance costs
(Loss)/profit before tax
Taxation
(Loss)/profit for the year after tax
Discontinued operations
(Loss)/profit for the year
Total comprehensive (loss)/income for the year attributable to equity holders
Basic and diluted (loss)/earnings per share
Continuing operations - Basic
Discontinued operations - Basic
Total
Continuing operations - Diluted
Discontinued operations - Diluted
Total
Note
5
6
8
8
8
7
8
10
11c
12
12
12
12
12
12
2015
£000
45,954
(37,033)
8,921
(12,369)
(3,448)
(1,275)
(820)
(373)
(54)
(8,683)
(14,653)
(245)
(14,898)
(172)
(15,070)
-
(15,070)
(15,070)
(1.57p)
-
(1.57p)
(1.57p)
-
(1.57p)
2014
£000
14,003
(9,247)
4,756
(3,711)
1,045
-
(81)
(111)
(27)
-
826
415
1,241
118
1,359
(345)
1,014
1,014
0.24p
(0.06p)
0.18p
0.22p
(0.05p)
0.17p
* Result for the year from continuing operations before net finance costs, depreciation, amortisation, integration and transactional items, impairment
charges and share based payment charge.
The (loss)/profit for the period equates to the Comprehensive (expense)/income for the year.
The notes on pages 32 to 58 are an integral part of these consolidated financial statements.
©2015 Coms PLC | www.comsplc.com
25
Consolidated statement of financial position
As at 31 January 2015
ASSETS
Non-current assets
Goodwill
Other Intangible assets
Property, plant and equipment
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
EQUITY and LIABILITIES
Capital and reserves attributable to equity shareholders
Share capital
Share premium
Merger reserve
Reverse acquisition reserve
Accumulated deficit
Total equity
Current liabilities
Overdraft
Trade and other payables
Provisions
Non-current liabilities
Deferred tax
Total liabilities
Total equity and liabilities
Note
2015
£000
2014
£000
13
14
15
16
17
18
22
22
22
18
19
20
21
9,651
1,718
1,798
-
13,167
305
10,658
492
11,455
24,622
3,015
27,816
1,911
(4,236)
(19,528)
8,978
878
13,603
878
15,359
285
15,644
24,622
12,885
1,851
1,031
204
15,971
364
8,704
999
10,067
26,038
2,864
19,965
1,911
(4,236)
(4,513)
15,991
-
9,996
-
9,996
51
10,047
26,038
The financial statements were approved by the Board of Directors and authorised for issue on 31 July 2015.
They were signed on its behalf by:
Diana Dyer Bartlett
Director
31 July 2015
Company Number: 5332126
©2015 Coms PLC | www.comsplc.com
26
Consolidated statement of cash flows
For the year ended 31 January 2015
Cash flows from operating activities
(Loss)/profit before taxation
Depreciation
Amortisation
Share based payment charge
Release of deferred consideration
Net finance costs
Intangible asset impairment
Property, plant and equipment impairment
Goodwill impairment
Movement in provisions
Loss/(profit) on sale of fixed assets
Operating cashflows before movements in working capital
Decrease/(increase) in inventories
Increase in receivables
Increase in payables
Net cash used in operating activities
Cash flows from investing activities
Acquisition of subsidiaries (net of cash acquired)
Acquisition of intangible assets
Proceeds from sale of property, plant and equipment
Acquisition of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issues of share capital (net of issue costs)
Net finance costs
Repayment of finance leases
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
Note
7
7
7
2015
£000
(14,898)
820
373
54
(1,294)
245
1,360
416
6,907
878
21
(5,118)
101
(325)
1,944
(3,398)
(3,770)
(15)
54
(2,206)
(5,937)
8,003
(53)
-
7,950
(1,385)
999
(386)
2014
£000
896
117
146
27
-
(415)
-
-
-
(594)
(225)
(48)
(63)
(940)
675
(376)
(7,309)
(312)
-
(470)
(8,091)
9,358
(63)
(1)
9,294
827
172
999
Cash and cash equivalents comprise cash at bank and other short-term highly liquid investments with maturity of three
months or less, as adjusted for any bank overdrafts.
27
©2015 Coms PLC | www.comsplc.com
Consolidated statement of changes in equity
Attributable to equity holders of the Company
Note
Share
capital
£000
2,363
At 1 February 2013
Profit for the year
Total comprehensive income for the year
Transactions with the owners:
Proceeds from shares issued
Share issue costs
Share based payment charge
At 31 January 2014
At 1 February 2014
Loss for the year
Total comprehensive loss for the year
Transactions with the owners:
Proceeds from shares issued
22
Share issue costs
Share based payment charge
At 31 January 2015
-
-
501
-
-
2,864
2,864
-
-
151
-
-
Share
premium/
merger reserve
Reverse
acquisition
reserve
Accumulated
deficit
£000
9,497
-
-
12,877
(499)
-
21,875
21,875
-
-
8,267
(415)
-
£000
(4,236)
-
-
-
-
-
(4,236)
(4,236)
-
-
-
-
-
Total
£000
2,071
1,014
1,014
13,378
(499)
27
15,991
15,991
£000
(5,553)
1,014
1,014
-
-
27
(4,512)
(4,512)
(15,070)
(15,070)
(15,070)
(15,070)
-
54
8,418
(415)
54
3,015
29,727
(4,236)
(19,528)
8,978
©2015 Coms PLC | www.comsplc.com
28
Company statement of financial position
As at 31 January 2015
ASSETS
Non-current assets
Investment in subsidiaries
Intangible assets
Amounts due from subsidiaries
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
EQUITY AND LIABILITIES
Capital and reserves attributable to equity shareholders
Share capital
Share premium
Merger reserve
Accumulated deficit
Total equity
Current liabilities
Trade and other payables
Total equity and liabilities
Note
2015
£000
2014
£000
27
14
17
17
18
22
9,247
-
-
9,247
2,876
5
2,881
12,128
3,015
27,816
1,911
(21,303)
11,439
11,947
58
5,064
17,069
60
85
145
17,214
2,864
19,965
1,911
(9,366)
15,374
19
689
1,840
12,128
17,214
The financial statements were approved by the Board of Directors and authorised for issue on 31 July 2015.
They were signed on its behalf by:
Diana Dyer Bartlett
Director
31 July 2015
Company Number: 5332126
©2015 Coms PLC | www.comsplc.com
29
Company statement of cash flows
For the year ended 31 January 2015
Cash flows from operating activities
Loss before taxation
Depreciation and amortisation
Impairment provision
Gain on deferred consideration
Share based payment charge
Net finance costs
Operating cashflow before working capital movement
Increase in receivables
Increase in payables
Net cash used in operating activities
Cash flows from investing activities
Acquisition of subsidiary (net of cash acquired)
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issues of share capital (net of issue costs)
Net finance costs
Repayment of loan
Net cash from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
2015
£000
2014
£000
(11,992)
(649)
58
2,700
(219)
54
203
(9,196)
(231)
2,738
(6,689)
46
-
-
27
63
(513)
(2,865)
1,683
(1,695)
(1,385)
(1,385)
(7,650)
(7,650)
8,003
(9)
-
7,994
(80)
85
5
9,358
(62)
10
9,306
(39)
124
85
©2015 Coms PLC | www.comsplc.com
30
Company statement of changes in equity
Attributable to equity holders of the Company
Note
Share
capital
Share premium/
merger reserve
Accumulated
deficit
At 1 February 2013
Loss for the year
Total comprehensive loss for the year
Transactions with the owners:
Proceeds from shares issued
Share issue costs
Share based payment charge
At 31 January 2014
At 1 February 2014
Loss for the year
Total comprehensive loss for the year
Transactions with the owners:
Proceeds from shares issued
22
Share issue costs
Share based payment charge
At 31 January 2015
£000
2,363
-
-
501
-
-
2,864
2,864
151
-
-
£000
9,497
-
-
12,877
(499)
-
21,875
21,875
8,267
(415)
-
£000
(8,743)
(649)
(649)
-
-
27
(9,365)
(9,365)
(11,992)
(11,992)
-
-
54
Total
£000
3,117
(649)
(649)
13,378
(499)
27
15,374
15,374
(11,992)
(11,992)
8,418
(415)
54
3,015
29,727
(21,303)
11,439
©2015 Coms PLC | www.comsplc.com
31
Notes to the financial statements
1 General information
Coms plc is a company incorporated in England and Wales under the Companies Act 2006 and listed on the AIM market.
The address of the registered office is given on page 17. The nature of the Group’s operations and its principal activities
are set out in the Directors’ report and in the Operational review in the Strategic report.
These financial statements are presented in pounds sterling as that is the currency of the primary economic environment
in which the Group operates. There are no foreign subsidiaries in the Group.
Going concern
As detailed in the Directors’ report, the Directors consider that the Company and the Group have adequate resources to
continue in existence for the foreseeable future. In assessing the outlook for the Company and Group, the Board took
account of the Group’s new £2.0m overdraft facility and certain events after the balance sheet date which have materially
strengthened the financial position:
n The disposal of the loss-making Telephony Services division in May 2015 for £2.5m in cash, with the potential of up to
another £1.0m cash, conditional on required levels of revenue at a future date.
n The completion in June 2015 of a placing and open offer, raising a further £2.1m in cash before expenses. The open offer
to existing shareholders, was more than 50% oversubscribed.
The Directors have assessed the Group’s current forecasts, taking into account reasonable changes in trading
performance. The assessment considered stress tests and mitigating actions available to the Group. On the basis of this
review, the Directors believe that the Group will continue to operate within the resources currently available to it. The
Directors accordingly continue to adopt the going concern basis in preparing these financial statements.
2 Basis of preparation and significant accounting policies
The consolidated financial statements of Coms plc have been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRS’s as adopted by the EU), IFRS Interpretations Committee and the Companies
Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under
the historical cost convention.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The
areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to
the consolidated financial statements are disclosed in note 3.
Except as described below, the accounting policies applied are consistent with those of the annual financial statements
for the period ended 31 January 2014 as described in those annual financial statements.
Standards, amendments to and interpretation of existing standards not yet effective
At the date of approval of these financial statements, the following standards, interpretations and amendments were
issued but not yet mandatory for the Group and early adoption has not been applied:
International Financial reporting Standards (IFRS)
n IFRS 2 Share based payment amendments
n IFRS 3 Business combinations amendments
n IFRS 8 Operating segments amendments
n IFRS 13 Fair value measurement amendments
n IAS 16 Property, plant and equipment amendments
n IAS 19 Employee benefits amendments
n IAS 24 Related party disclosures amendments
n IAS 38 Intangible assets amendments
n IAS 40 Investment property amendments
All other amendments to existing standards are not yet endorsed by the EU at the date of approval of these
financial statements.
It is considered that the above mentioned standards, amendments and interpretations will not have a significant effect
on the results of the Group.
©2015 Coms PLC | www.comsplc.com
32
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by
the Company (its subsidiaries) made up to 31 January each year. Control is achieved when the Company is exposed, or has
rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its
power over the investee.
On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the
date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is
recognised as goodwill.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used
into line with those used by the Group.
Reverse acquisition accounting
The acquisition of Coms.com Limited in the year ended 31 January 2007 was accounted for as a reverse acquisition of
Coms plc by Coms.com Limited. The consolidated financial statements prepared following the reverse takeover were
issued in the name of Coms plc, but they are a continuance of the financial statements of Coms.Com Limited. Therefore
the assets and liabilities of Coms.Com Limited were recognised and measured in the consolidated financial statements
at their pre-combination carrying values. The financial statements reflect the continuance of the financial statements of
Coms.com Limited.
The retained earnings and other equity balances recognised in these consolidated financial statements at the time of
the acquisition were the retained earnings and other equity balances of Coms.Com Limited immediately before the
business combination.
Under reverse acquisition accounting:
n an adjustment within shareholders’ funds is required to eliminate the cost of acquisition in the issuing Company’s
books, and introduce a notional cost of acquiring the smaller issuing Company based on the fair value of its shares.
n an adjustment is required to show the share capital of the legal parent in the consolidated balance sheet rather than
that of the deemed acquirer.
Both adjustments have been included in the reverse acquisition reserve.
Merger reserve
The merger reserve is used when a share issue is undertaken and merger relief is available.
The conditions for merger relief are when the consideration for shares in another company includes issued shares of
the acquirer and on completion of the transaction, the company issuing the shares will have secured at least 90% equity
holding in the acquiree.
©2015 Coms PLC | www.comsplc.com
33
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefit will flow to the Group and can be
reliably measured. Revenue is measured at the fair value of the consideration received, net of discounts, VAT and other
sales duty. The following specific recognition criteria must also be met before revenue is recognised:
Services – the Group provides a number of services including provision of telephony calls and minutes; revenue is
recognised as services are performed.
Maintenance – the Group provides maintenance to corporate customers. Revenue is recognised evenly over the
maintenance contract.
Hardware – revenue is recognised on the delivery of goods.
Consultancy – consultancy is typically invoiced based on a daily value, revenue is recognised as the consultancy services
are delivered.
Installation – revenue is recognised at the point of installation.
Projects – revenue from fixed price contracts is recognised on the percentage of completion method, to the extent
that the level of completion for a contract can be reliably measured. Where the percentage of completion cannot be
reliably measured, revenue is recognised when specified contractual milestones are met or on project completion. When
it is probable that total contract costs will exceed total revenue, the expected loss is recognised immediately. Revenue
relating to contracted maintenance is recognised evenly over the period of the agreement.
Where costs incurred plus recognised profits less recognised losses exceed progress billings, the balance is shown as
“amounts recoverable on contracts” within trade and other receivables. Where progress billings exceed costs incurred
plus recognised profits less recognised losses, the balance is shown as deferred income within creditors.
Property, plant and equipment
Property, plant and equipment are stated at cost of acquisition less accumulated depreciation and impairment losses.
Depreciation is provided on a straight-line basis at rates calculated to write off the cost less the estimated residual value
of each asset over its expected useful economic life. The residual value is the estimated amount that would currently
be obtained from disposal of the asset if the asset were already of the age and in the condition expected at the end
of its useful life.
Depreciation
Property, plant and equipment are depreciated using the straight-line method based on estimated useful lives.
The annual rates of depreciation for each class of depreciable asset across the Company are:
Fixtures and fittings – 20-25% straight line
Office equipment – 25-33.3% straight line
Leasehold improvements – 20% straight line
The carrying value is assessed annually and any impairment is charged to the income statement.
©2015 Coms PLC | www.comsplc.com
34
Financial assets
The Group classifies its financial assets into one of the categories below, depending on the purpose for which the asset
was acquired.
Trade receivables and other debtors: These are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. They arise principally through the provision of goods and services but also
incorporate other types of contractual monetary assets. They are initially recognised at fair value plus transaction costs
that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the
effective interest rate method, less provision for impairment. A provision for impairment is established when there
is objective evidence that the Group will not be able to collect all amounts due according to the original terms of
the receivables.
Cash and cash equivalents: These include cash in hand, deposits held at call with banks and bank overdrafts.
The Company had an overdraft facility of £3m with its main bank at the year end, which was reduced to £2m following
the disposal of the trade and assets of the Telphony Services division in May 2015.
Financial liabilities
The Group’s financial liabilities are trade payables and other financial liabilities.These are initially recognised at fair value
and subsequently carried at amortised cost using the effective interest rate method.
Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result
of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the
effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects
the current market assessment of the time value of money and, where appropriate, the risks specific to the liability.
Corporation tax
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income or expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax
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 balance sheet 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 temporary differences can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of
other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and
associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable future.
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 that are expected to apply in the year when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt with in equity.
©2015 Coms PLC | www.comsplc.com
35
Other intangible assets
All intangible assets excluding goodwill are stated at cost less accumulated amortisation and any accumulated
impairment losses.
Goodwill
Goodwill represents the amount by which the fair value of the cost of a business combination exceeds the fair value of
net assets acquired. Goodwill is not amortised and is stated at cost less any accumulated impairment losses.
The recoverable amount of goodwill is tested for impairment annually or when events or changes in circumstance indicate
that it might be impaired. Impairment charges are deducted from the carrying value and recognised immediately in the
income statement. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash generating
units expected to benefit from the synergies of the combination. If the recoverable amount of the cash generating unit
is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any
goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of
each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
Research and development
Expenditure on research activities is recognised as an expense in the year in which it is incurred.
An internally-generated intangible asset arising from the development of the Group’s VOIP system, the Company’s core
technology, is recognised only if all of the following conditions are met:
n an asset is created that can be identified (such as software and new processes);
n it is probable that the asset created will generate future economic benefits; and
n the development cost of the asset can be measured reliably.
n an intention to complete the intangible asset and use or sell it, and
n ability to use or sell the intangible asset, and
n the availability of adequate technical financial and other resources to complete the development and to use or sell the
intangible asset.
Acquired intangible assets
Following business combinations (see note 4) the assets acquired are classified into tangible and intangible assets and fair
values applied using the principles of IFRS 3. This leads to creation of intangible assets recognised on the balance sheet.
Amortisation
Internally-generated intangible assets are amortised on a straight-line basis over their estimated useful lives of 10 years.
Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense
in the year in which it is incurred.
©2015 Coms PLC | www.comsplc.com
36
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts 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 the
asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount
of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for
impairment annually and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows
have not been adjusted.
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. An impairment loss is recognised
as an expense immediately, unless the relevant asset is carried at a re-valued 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 in
prior years. 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.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises materials and, where applicable,
direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and
condition. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling
price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
Share based payments
Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the
income statement over the vesting period. Non-market vesting conditions are taken into account by adjusting the
number of equity instruments expected to vest at the balance sheet date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are
factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made
irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure
to achieve a market vesting condition.
Fair value is measured using an appropriate option pricing model. The expected life used in the model has been
adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and
behavioural considerations.
Where equity instruments are granted to persons other than employees, the consolidated income statement is charged
with the fair value of goods and services received.
©2015 Coms PLC | www.comsplc.com
37
Foreign currency
The individual financial statements of each group entity are presented in the currency of the primary economic
environment in which the entity operates (its functional currency). For the purpose of the consolidated financial
statements, the results and financial position of each entity are expressed in pounds sterling which is also the
presentation currency for the consolidated and Company financial statements. The functional currency of the
Company is pounds sterling.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional
currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each
balance sheet date, monetary items denominated in foreign currencies are re-translated at the rates prevailing at the
balance sheet date.
Exchange differences arising on the settlement of monetary items and on the re-translation of monetary items are
included in the income statement.
Investments in subsidiaries
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
Leases
Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of
the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is
included in the statement of financial position as a finance lease obligation. Lease payments are treated as a reduction of
the lease obligation on the remaining balance of the liability. Finance expenses are recognised immediately in the income
statement, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with
the Group’s general policy on borrowing costs. Contingent rentals are recognised as expenses in the periods in which they
are incurred.
Rental leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified
as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged
to the income statement.
3 Critical accounting estimates and judgements
The Group makes estimates and assumptions concerning the future, which may differ from the actual results. The
estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets
and liabilities within the next financial year are set out below.
Revenue recognition
Revenue and expenses on fixed price contracts are recognised using the percentage-of-completion method. Revenue,
expenses, and ultimately profit are therefore recognised over the life of the activity of the contract. When the outcome
of a contract cannot be reliably estimated then revenue can only be recognised to the extent that it is recoverable. When
total expected costs exceed the total contract value the expected loss is recognised immediately.
As revenue is therefore recognised on a percentage-of-completion basis which will be based on management’s best
estimate of expected total contract revenue and expected total contract costs it is an area that requires critical
estimation and judgement.
Impairment of goodwill
The Group is required to test goodwill for potential impairment on an annual basis. The recoverable amount of goodwill
relating to continuing activities is determined based on the value in use calculations which require the estimation of
future cash flows and the selection of a discount rate. Actual outcomes of this calculation may vary, further information
concerning issues affecting the carrying values is given in note 7.
Acquired intangible assets
On acquisition of a business, the Group is required to value the assets acquired and recognise intangible assets on the
balance sheet. The valuation of these assets relies on various assumptions, including future revenues and costs derived
from those assets and the selection of an appropriate discount rate in order to calculate the present values of those cash
flows. Further information concerning intangible assets acquired during the year is given in note 4.
38
©2015 Coms PLC | www.comsplc.com
Provisions
The Group has made a number of provisions in the financial statements to deal with claims, disputes and onerous
contracts. The actual outcome of such matters may differ from the Directors’ assessment of the likely outcome.
4 Business combinations
On 7 February 2014 Coms acquired certain subsidiaries of Actimax Acquisitions Limited for initial cash consideration of
£2.4m. The cash consideration was funded by the Company placing 138,333,333 new ordinary shares at 6p per share, with
certain institutional and other investors to raise £7.9m net of expenses.
Further consideration of up to £1.0m in cash was payable 13 months from completion of the acquisition, conditional upon
the billings achieved for the 12 months following completion, exceeding £7.6m. The performance target was not met and
accordingly no further consideration was payable. This resulted in a gain of £1.0m being recognised on the release of the
provision for contingent consideration.
The Actimax acquisition consists of a number of related companies, servicing approximately 800 customers, delivering
managed network, unified communications and data services.
On 10 March 2014 Coms acquired 100% of the issued share capital of Smarter Mobile UK Limited for a total cash
consideration of £0.2m. Smarter Mobile UK Ltd is a mobile service provider, specialising in a family mobile offering.
Both acquisitions were a continuation of the then strategy to build a Telephony Services provider of scale, building on
prior year related acquisitions. During the period these acquisitions contributed £8.3m revenue and £0.4m loss before tax,
which is also equivalent to the full year result had the Group owned both businesses since 1 February 2014.
Goodwill recognised on these acquisitions has been impaired at the year end see note 7.
Actimax and Smarter Mobile UK Limited
Intangible assets
Property, plant and equipment
Current assets
Current liabilities
Deferred tax liability
Net assets acquired
Goodwill
Total consideration
Satisfied by:
Cash
Contingent consideration
Less cash acquired
Total cash consideration
Book
values
£000
167
621
2,332
(5,712)
-
(2,592)
Fair value
adjustments
Fair values
£000
1,417
-
(414)
1,858
( 317)
2,544
£000
1,584
621
1,918
(3,854)
(317)
(48)
(48)
3,673
3,625
2,625
1,000
3,625
(240)
2,385
Included within the fair value adjustments is a reduction in current liability of £1.9m which reflects the waiving of Actimax
Group intercompany balances. On the acquisition of Actimax and Smarter Mobile UK Ltd, all aspects were fair valued and
customer contracts and relationships were recognised as intangible assets. The customer contracts and relationships were
valued on an income basis. The value is the present value of projected cash flows in excess of returns on contributory
assets during the life of the relationship with customers. Management assessed that these customer contracts and
relationships would have a useful economic life of at least ten years and therefore the intangible assets recognised would
be amortised over this period.
39
©2015 Coms PLC | www.comsplc.com
5 Segmental reporting
In the opinion of the Directors the Group’s activities comprise three material business segments which reflect the profiles
of the risks, rewards and internal reporting structures within the Group.
These are as follows:
n Redstone
n Darkside Studios
n Telephony Services
All activities were conducted within the United Kingdom and it is the opinion of the Directors that this represents one
geographical segment.
Revenue
Redstone
Darkside Studios
Telephony Services
(Loss)/profit for the year
Redstone
Darkside Studios
Telephony Services
Central administration costs
Discontinued operations
Balance Sheet analysis by segment
Redstone
Darkside Studios
Telephony Services
Central administration costs
Discontinued operations
2015
£000
29,468
1,099
15,387
45,954
2015
£000
246
51
(13,597)
(1,770)
-
(15,070)
2014
£000
8,020
60
5,923
14,003
2014
£000
1,537
(115)
586
(649)
(345)
1,014
2015
2014
Assets
Liabilities
Assets
Liabilities
£000
17,458
944
5,923
297
-
£000
(8,259)
(303)
(6,646)
(436)
-
£000
8,053
151
8,894
8,928
12
£000
(6,351)
(80)
(1,721)
(1,839)
(56)
24,622
(15,644)
26,038
(10,047)
Included in the above table are non-current assets of £9,781,000 (2014: 711,000) for Redstone, £655,000 (2014: 108,000) for
Darkside Studios, and £2,731,000 (2014: 6,165,000) for Telephony Services.
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©2015 Coms PLC | www.comsplc.com
6 Integration and transactional items
Integration costs
Transactional items
2015
£000
2,252
(977)
1,275
2014
£000
-
-
-
The integration costs include both employee and other restructuring costs such as provisions in respect of onerous
contracts. Employee costs include salary, redundancy and other exit costs.
Included in transactional items is the £1,000,000 release of the provision for the Actimax contingent consideration.
The performance conditions for the Actimax contingent consideration were not met and accordingly no consideration
was paid.
7 Impairment charge
The impairment charge comprises the following:
Goodwill
Other intangible assets
Property, plant and equipment
Note
13
14
15
2015
£000
6,907
1,360
416
8,683
2014
£000
-
-
-
-
Goodwill
Goodwill has been impaired as a consequence of the performance of the Telephony Services division, which was sold on
31 May 2015 to Timico Ltd.
Other intangible assets
During the year, the Board conducted a review of the carrying value of the Group’s other intangible assets. As a result, the
Group recorded a £1,360,000 impairment charge for the period, specific to the following:
n ADSL 24, a retail customer base acquired in May 2013 for £800,000, was fully written down generating an impairment
charge of £794,000. The impairment charge was recognised as the customer base was loss making with no expectation
of future profits.
n World Telecom, a corporate customer base, acquired in February 2013 for £50,000 was fully written down, generating
an impairment charge of £46,000. The impairment charge was recognised as the customer base was loss making with
no expectation of future profits.
n The network assets purchased in June 2013 from TFM Networks Ltd for £480,000 were fully written down in the
period, generating an impairment charge of £480,000. The cost of running the network far exceeds the profitability of
the ‘on network’ customer traffic and therefore the Directors took the view that there is no value in this investment.
n In August 2013 the Group made an investment of £40,000 to obtain a G-Cloud license (UK Government procurement).
Since obtaining the licence, the Group has failed to sign any significant customers and therefore the Board has taken
the decision to impair the asset in full, generating an impairment charge in the period of £40,000.
Property, plant and equipment
During the year, the Directors concluded a review of the carrying value of the Group’s property, plant and equipment,
specifically in light of the Board’s decision to vacate certain Group office locations. An impairment charge of £416,000 has
been recorded in the consolidated income statement in the period and relates to £264,000 of leasehold improvements
and £152,000 of other office equipment.
41
©2015 Coms PLC | www.comsplc.com
8 Operating (loss)/profit
Operating (loss)/profit from continuing operations is arrived at after charging:
Cost of Inventory is recognised as an expense
Amortisation of intangibles
Depreciation of property, plant and equipment
Loss/(profit) on disposal of property, plant and equipment
Loss on disposal of intangible asset
Staff costs (see note 9)
Share based payment charge
Loss/(gain) on foreign exchange
Rentals under operating leases
Impairment charge (see note 7)
Integration and transactional costs (see note 6)
Audit fees
-audit of the Company’s financial statements
-audit of the Company’s subsidiaries pursuant to legislation
Group
2015
£000
15,526
373
820
21
-
16,542
54
40
673
8,683
1,275
52
20
2014
£000
3,845
117
146
(225)
36
4,616
27
-
233
-
-
40
5
The analysis of administrative expenses in the consolidated income statement by nature of expense is as follows:-
n Administrative staff costs £7,295,000 (2014: £2,264,000)
n Operating leases - £673,000 (2014: £233,000)
n Depreciation and amortisation - £1,193,000 (2014: £263,000)
n Other operating expenses - £3,208,000 (2014: £950,000)
©2015 Coms PLC | www.comsplc.com
42
9 Staff costs
The average number of employees was:
Sales
Technical support
Administrative
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Pension costs
Group
2015
No.
29
274
56
359
£000
14,908
1,229
405
16,542
2014
No.
12
65
31
108
£000
4,075
485
56
4,616
£9,518,000 (2014: £2,253,000) of the above staff costs were included in cost of sales in the consolidated income statement.
10 Net finance costs
Net finance costs
Group
2015
£000
245
2014
£000
(415)
Included within net finance costs is an amount of £189,000 (2014: £63,000) relating to the unwinding of the discount on
the deferred consideration for Redstone. The credit in 2014 relates to a write back of an interest accrual in relation to the
Redstone acquisition.
©2015 Coms PLC | www.comsplc.com
43
11a Taxation
The Group tax charge for the year can be reconciled to the loss as disclosed in the statement of comprehensive
(loss)/income as follows:
(Loss)/profit before taxation
Tax at the UK corporation tax rate of 21.33% (2014: 23.75%)
Discontinued operations
Depreciation in excess of capital allowances
Items not deductible for tax purposes
Capital allowances/profit on disposal
Utilisation of losses brought forward
Losses carried forward
Tax charge for period
Deferred taxation
Taxation
Group
2015
£000
(14,898)
(3,178)
-
469
18
(98)
-
2,789
-
172
172
2014
£000
1,241
295
(82)
54
20
(176)
(109)
60
62
(180)
(118)
At 31 January 2015 the Group had estimated tax losses of £16,648,000 (2014: £5,228,000) to carry forward against
future profits. These losses have not been recognised as a deferred tax asset owing to the Directors’ assessment
of recoverability in the short term.
A reduction in the UK corporation tax rate from 24% to 23% (effective 1 April 2013) was substantively enacted on
3 July 2012. Further reductions to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015) were substantively
enacted on 2 July 2013. In the Budget on 8 July 2015, the Chancellor announced additional planned reductions to 18% by
2020. This will reduce the Company’s future current tax charge accordingly. The deferred tax liability at 31 January 2015
has been calculated based on the rate of 20% substantively enacted at the balance sheet date.
©2015 Coms PLC | www.comsplc.com
44
11b Deferred taxation
The analysis of deferred tax assets and deferred tax liabilities is as follows:-
Deferred tax assets
Deferred tax liabilities
Deferred tax (liability)/asset
Deferred tax assets comprised of:
Trading losses carried forward
Group
2015
£000
-
(285)
(285)
-
2014
£000
204
(51)
153
204
The 2015 deferred tax liability of £285,000 relates to the intangible asset acquired during the year.
11c Taxation charge
The taxation charge for the year of £172,000 (2014: credit of £118,000) includes a write down of the £204,000 deferred tax
asset which was recognised in 2014. The Directors believe that this is not recoverable in light of current trading forecasts.
This has been offset by a credit of £32,000 relating to the unwinding of the deferred tax liability recognised on the
acquisition of Actimax.
12 Earnings per share
Earnings per share data is based on the Group (loss)/profit for the year and the weighted average number of ordinary
shares in issue.
2015
2014
Continuing
operations
Continuing
operations
Discontinued
operations
Basic (loss)/profit per share
Diluted (loss)/profit per share
(Loss)/profit for the year attributable to owners of the
parent company (£000)
(1.57p)
(1.57p)
(15,070)
0.24p
0.22p
1,359
Number of shares
Total
0.18p
0.17p
(0.06p)
(0.05p)
(345)
1,014
2015
No.
2014
No.
Weighted average number of ordinary shares in issue
957,474,129
559,408,855
Weighted average number of potentially dilutive ordinary shares in issue
957,474,129
612,427,892
Warrants and employee share options are non-dilutive in loss making periods.
©2015 Coms PLC | www.comsplc.com
45
13 Goodwill
Cost
At 1 January 2013
Additions
At 31 January 2014
Additions
At 31 January 2015
Accumulated impairment charge
At 1 January 2013 and 2014
Impairment charge
At 31 January 2015
Carrying value at 31 January 2015
Carrying value at 31 January 2014
Carrying value at 31 January 2013
Carrying value of goodwill is allocated as follows:
Redstone
Darkside Studios
Telephony Services
Group
Note
4
2015
£000
8,724
350
577
9,651
£000
1,952
10,933
12,885
3,673
16,558
-
6,907
6,907
9,651
12,885
1,952
2014
£000
8,724
-
4,161
12,885
During the year the Group acquired 100% of the issued share capital of Actimax and Smarter Mobile UK which gave rise
to goodwill of £3,673,000.
At the year end the Group recorded an impairment charge in relation to goodwill of £6,907,000. The Impairment charge
relates to the Telephony Services division, which was sold post year end on 31 May 2015 to Timico Ltd.
Goodwill reported in 2014 included Darkside Studios in Telephony Services. Following the review of strategy Darkside
is no longer only used for internal Group purposes, generating its own independent cashflows therefore goodwill is
separately identified.
Fair value
Goodwill on consolidation has been allocated for impairment testing purposes to three cash-generating units (“CGUs”).
The CGUs are Redstone, Darkside Studios and the Telephony Services division. The recoverable amount of the Redstone
and Darkside Studios CGUs is based on value in use calculations using cash flow projections approved by the Directors
covering a three year period. The recoverable amount for the Telephony Services has been based on the post year end
disposal of this business unit allowing for post year end losses.
The projections for Redstone and Darkside Studios are based on the assumption that the Group can realise projected
sales. If the projected sales do not materialise there is a risk that the total value of the intangible assets shown above
would be impaired. The Company, in its prudent approach has based its projections on key assumptions of annualised
incremental growth in revenue and cost of sales of 5% with 2% attributed to administrative costs. The calculation of
residual value has utilised 2% growth rates. Sensitivity analysis indicates that if revenues declined by 10% or administrative
expenses increased by 10%, this would not give rise to an impairment charge.
Each CGU has its own pre-tax discount rate: 12% has been used for Redstone and 15% for Darkside Studios. These
rates take into consideration the Group’s cost of capital, the expected rate of return and various risks relating to the
relevant CGU. At the year end, based on these assumptions there is no indication of impairment in the value of the
remaining goodwill.
46
©2015 Coms PLC | www.comsplc.com
14 Other intangible assets
Group
Development
costs
Other intangible
assets
Cost or valuation
At 1 February 2013
Additions
At 31 January 2014
Additions
Acquisition of subsidiaries
At 31 January 2015
Accumulated amortisation and impairment
At 1 February 2013
Charge for the year
At 31 January 2014
Charge for the year
Impairment (see note 7)
At 31 January 2015
Carrying value
At 31 January 2015
At 31 January 2014
At 31 January 2013
£000
216
222
438
-
-
438
150
55
205
128
-
333
105
233
66
£000
138
1,570
1,708
16
1,584
3,308
34
56
90
245
1,360
1,695
1,613
1,618
104
Company
Other intangible
assets
£000
138
-
138
-
-
138
35
45
80
58
-
138
-
58
103
Total
£000
354
1,792
2,146
16
1,584
3,746
184
111
295
373
1,360
2,028
1,718
1,851
170
During the year, the Board conducted a review of the carrying value of the Group’s intangible assets. As a result, the
Group recorded a £1,360,000 impairment charge for the period, as detailed in note 7.
©2015 Coms PLC | www.comsplc.com
47
15 Property, plant and equipment
Plant &
machinery
Leasehold
improvements
Fixtures &
fittings
Computer
equipment
Group
Cost
At 1 February 2013
Acquisition of subsidiaries
Additions
Disposals
At 31 January 2014
Acquisition of subsidiaries
Additions
Disposals
At 31 January 2015
Accumulated depreciation
and impairment
At 1 February 2013
Acquisition of subsidiaries
Charge for the year
Disposals
At 31 January 2014
Charge for the year
Impairment (see note 7)
Disposals
At 31 January 2015
Carrying value
At 31 January 2015
At 31 January 2014
At 31 January 2013
£000
£000
£000
136
13
84
-
233
231
69
(177)
356
108
10
23
-
141
212
-
(104)
249
107
92
28
-
633
34
-
667
27
961
(656)
999
-
598
20
-
618
171
264
(656)
397
602
49
-
29
86
84
-
199
114
101
(53)
361
25
62
13
-
100
52
152
(53)
251
110
99
4
£000
85
1,724
661
(488)
1,982
249
324
(2)
Total
£000
250
2,456
863
(488)
3,081
621
1,455
(888)
2,553
4,269
86
1,568
25
(488)
1,191
385
-
(2)
1,574
979
791
-
219
2,238
81
(488)
2,050
820
416
(815)
2,471
1,798
1,031
32
During the year, the Directors concluded a review of the Group’s property, plant and equipment carrying values,
specifically in light of the Board’s decision to vacate certain Group office locations. An impairment charge £416,000 has
been recorded in the consolidated income statement in the period and relates to leasehold improvements (£264,000) and
fixtures & fittings (£152,000).
©2015 Coms PLC | www.comsplc.com
48
16 Inventories
Finished goods
17 Trade and other receivables
Current
Financial assets
Trade receivables
Amounts recoverable on contracts
Other receivables
Amounts due from subsidiaries less impairment provisions
Taxes and social security costs
Accrued income
Non-financial assets - prepayments
Non-current
Group
2015
£000
305
Group
Company
2015
£000
5,617
2,773
423
-
96
523
2014
£000
4,255
2,981
568
-
42
121
2015
£000
-
-
201
2,585
54
-
9,432
7,967
2,840
1,226
10,658
737
8,704
36
2,876
2014
£000
364
2014
£000
-
-
14
-
41
-
55
5
60
Amounts due from subsidiaries less impairment provisions
-
-
-
5,064
The Directors consider that the carrying amount of trade and other receivables equals their fair value.
Included within other debtors is an amount of £nil (2014: £401,000) that comprises monies secured against an operating
lease. The amounts owed by subsidiary companies are non-interest bearing and repayable on demand.
Amounts recoverable on contracts includes contract costs plus recognised profits of £9,239,000 (2014: £8,402,000) less
progress billings of £6,869,000 (2014: £5,885,000) and retention monies.
18 Cash and cash equivalents
Bank current account
Bank current account - overdraft
Group
Company
2015
£000
492
(878)
(386)
2014
£000
999
-
999
2015
£000
5
-
5
2014
£000
85
-
85
The carrying amount of these assets approximates their fair value. The Group’s banking arrangements are secured by
a debenture over the assets of the principle operating businesses and cross guarantees. Interest is variable and payable
on demand.
49
©2015 Coms PLC | www.comsplc.com
19 Trade and other payables
Current
Financial liabilities
Trade payables
Social security and other taxes
Other payables
Accruals
Deferred consideration
Amounts owed to subsidiary company
Non-financial liabilities
Deferred income
Group
2015
£000
5,957
2,030
405
3,207
171
-
11,770
1,833
13,603
2014
£000
3,148
1,296
656
2,806
1,661
-
9,567
429
9,996
Company
2015
£000
177
-
-
87
171
254
689
-
689
2014
£000
-
-
1,661
179
-
-
1,840
-
1,840
The amounts owed to subsidiary companies are non-interest bearing and repayable on demand. The Directors consider
that the carrying amount of trade and other payables equals their fair value. During the year a further £1,385,000 deferred
consideration was paid to settle the outstanding consideration payable in respect of Redstone which generated a gain of
£298,000, leaving £172,000 outstanding at the year end .
20 Provisions
Current
Onerous contracts
Other provisions
Group
2015
£000
400
478
878
2014
£000
-
-
-
The Directors have made provision for certain Group offices where the lease is deemed to be onerous, negotiations are
on going, however, the Board has made provision for £400,000 as a best estimate. Other provisions relate to customers
and supplier issues where the Directors believe that there is a likely cash outflow.
21 Deferred tax liability
Non-current
Deferred tax liability
©2015 Coms PLC | www.comsplc.com
Group
2015
£000
285
285
2014
£000
51
51
50
22 Share capital and reserves
The Company’s share capital comprises:
Allotted, called up and fully paid:
Ordinary shares of 0.1p each
Deferred shares of 1p each
Deferred shares of 0.1p each
2015
Number
2014
Number
973,254,149
127,144,044
821,789,864
127,144,044
770,714,046
770,714,046
2015
£000
973
1,271
771
3,015
Movements in issued and fully
paid ordinary shares capital
Placing
Placing fee
EMI Share exercise
Warrant Exercise
MI Share exercise
Total movement In the year
At 31 January 2014
At 31 January 2015
Number
138,333,333
-
Issue
price
6p
-
10,250,000
0.825p
2.7p
0.84p
500,000
2,380,952
151,464,285
821,789,864
973,254,149
Share
capital
£000
138
-
10
1
2
151
822
973
Share
premium
£000
8,162
(415)
74
13
18
7,852
19,964
27,816
Merger
reserve
£000
-
-
-
-
-
-
1,911
1,911
2014
£000
822
1,271
771
2,864
Total
£000
8,300
(415)
84
14
20
8,003
22,697
30,700
The share premium account comprises the amount subscribed for share capital in excess of nominal value.
The merger reserve arose where equity shares were allotted on the acquisition of subsidiaries and represents the
difference between the fair value attributed to the share allotment in excess of the nominal value of the shares allotted.
The reverse acquisition reserve arose on the acquisition of Coms.com Limited which was accounted for as a reverse
acquisition. Under IFRS the consolidated accounts of Coms plc are treated as though they are a continuation of the
consolidated accounts of Coms.com Limited. The reverse acquisition reserve represents the difference between the initial
equity share capital of Coms plc and the share capital and share premium of Coms.com Limited at the date of acquisition.
The accumulated deficit represents the cumulative loss of the Group attributable to equity shareholders of Coms plc.
©2015 Coms PLC | www.comsplc.com
51
23 Retirement benefit schemes
The Group operates a defined contribution company pension scheme for the Directors and employees. The assets
of the scheme are held separately from those of the Company. The annual contributions payable are charged to the
income statement. For the period, pension costs incurred were £405,000 (2014: 56,000) with £293,000 (2014: £35,000) being
included in cost of sales.
24 Related-party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation
and are not disclosed in this note.
Remuneration of key management personnel
During the year there were a number of transactions between the Company and its Directors.
Directors’ fees
Director’s fees of £91,000 (2014: £39,000) were paid to Gladstone Consultancy Partnership, of which Iain Ross is a partner,
in respect of services provided by Iain Ross; £18,000 (2014: £9,000) was outstanding at the year end. Director’s fees
of £49,000 (2014: £7,000) were paid to Warspite Limited, a company connected to Diana Dyer Bartlett, in respect of
services provided by Diana Dyer Bartlett; £23,000 (2014: £2,000) was outstanding at the year end. Director’s fees of
£43,000 (2014: £62,000) were paid to Iridian Consulting Services Limited, a company connected to Stephen Foster, in
respect of services provided by Stephen Foster; £3,000 (2014: £2,000) was outstanding at the year end. Graham Herring
provided services totalling £7,000 (2014: £8,000) during the year; at the year end nil was outstanding (2014: £2,000).
Directors’ transactions
Products and services
During the year the Company entered into the following trading activities with companies or partnerships connected
with Dave Breith:
n The Group utilised the billing platform, Ask Merlin, and the associated direct debit services provided by Payment Centre for
which it paid licence fees of £105,000 (2014: £63,000). In addition, the Group incurred £304,000 (2014: £157,000) maintenance
and development costs in relation to Ask Merlin.
n The Group sourced hardware from Vitrx Limited on arm’s-length terms. During the year, purchases amounting to
£135,000 (2014: £118,000) were made and the balance outstanding at 31 January 2015 to Vitrx was £36,000 (2014: £2,000).
n The Group purchased marketing and website services from Blabbermouth Marketing Limited on arm’s length terms.
During the year services provided amounted to £158,000 (2014: £53,000) and the amount due to Blabbermouth at the
period end was £15,000 (2014: £2,000).
n During the year the Group supplied services to Sugar Cube Animation amounting to £92,000 (2014: £nil). At the year
end the Group held a deposit from Sugar Cube Animation of £108,000 (2014: £nil).
©2015 Coms PLC | www.comsplc.com
52
25 Commitments
a) Capital commitments
There were no capital commitments at 31 January 2015 (2014: £nil).
b) Operating lease commitments
The Group leases office buildings and warehousing under licences/leases to occupy.
Lease 1 – has a life of 57 months terminating in September 2018.
Lease 2 – has a life of 5 years terminating in September 2018.
Lease 3 – has a life of 10 years terminating in June 2024.
Future minimum lease payments under
non-cancellable operating leases are as follows:
2015
Property
Within one year
After one year but not more than 5 years
After 5 years
26 Financial instruments
£000
263
1,901
848
3,012
2015
Vehicles
£000
99
103
-
202
2014
Property
£000
245
1,701
-
1,946
2014
Vehicles
£000
73
59
-
132
Financial instruments
In common with other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note
describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them.
Further quantitative information in respect of these risks is presented throughout these financial statements.
The significant accounting policies regarding financial instruments are disclosed in the section ‘Financial assets and
liabilities in note 2’.
There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and
processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated
in this note.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
Financial assets
Financial liabilities
Group
Company
Note
17
19
2015
£000
9,432
11,770
2014
£000
7,967
9,567
2015
£000
2,840
689
2014
£000
55
1,840
There were no material differences between the fair value and the carrying amounts of the Group’s financial instruments.
©2015 Coms PLC | www.comsplc.com
53
Financial risk management
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and,
while retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that
ensure the effective implementation of the objectives and policies to the Group’s finance function.
The overall objective of the Board is to set polices that seek to reduce risk as far as possible without unduly affecting the
Group’s competitiveness and flexibility. Further details regarding these policies are set out below:
Credit risk
Credit risk is the risk that a counterparty to a transaction with the Group fails to discharge its obligations in respect
of the instrument. The Group’s credit risk arises on (i) transactions with customers in connection with delivery of
products or services (ii) cash and cash equivalents placed with banks and financial institutions
Management focuses strongly on working capital management and the collection of due invoices. Regular reports of
overdue invoices are circulated amongst senior management and the Board reviews debtor days each month as part
of the monthly reporting cycle. The risk with any one customer is limited by constant review of debtor balances and
amounts receivable on contracts and action to resolve any issues preventing discharge of obligations.
As at 31 January 2015 the ageing analysis of trade receivables of the Group is as follows:
Total
£000
5,617
4,255
2015
2014
Not yet due
0-60 days
60-90 days
>90 days
£000
2,197
1,907
£000
2,004
1,457
£000
620
432
£000
796
459
Credit risk on cash and cash equivalents is reduced by placing funds with banks with high credit ratings.
Liquidity risk
Liquidity risk is the risk that the Group cannot meet financial liabilities when they fall due. The Group’s policy for
managing liquidity risk is to ensure that the business has enough financial resources to carry out its day-to-day activities
at any point in time. Management believes that the cash resources on hand, together with the profits of the business,
more than cover the resources needed to meet the financial liabilities of the Group.
Interest rate risk
The Group has no interest-bearing liabilities in the form of long-term bank borrowings and accordingly there
is no associated interest rate risk.
There is no significant interest rate risk in respect of temporary surplus funds invested in deposits and other
interest-bearing accounts with financial institutions as the operations of the Group are not dependent on the
finance income received. However it is the Group’s policy to manage the interest rate risk over the cash flows on
its invested surplus funds by using only substantial financial institutions when such funds are invested.
©2015 Coms PLC | www.comsplc.com
54
Capital
The Group considers its capital to comprise its ordinary share capital, deferred share capital, share premium, merger
reserve, reverse acquisition reserve and accumulated retained deficit as its capital reserves. A summary of the amounts
of capital in each of these categories is shown in the consolidated statement of changes in equity on page 28.
In managing its capital, the Group’s primary objective is to provide a return for its equity shareholders through capital
growth. Going forward the Group will seek to maintain a gearing ratio that balances risks and returns at an acceptable
level and also to maintain a sufficient funding base to enable the Group to meet its working capital and strategic
investment needs. In making decisions to adjust its capital structure to achieve these aims, either through new share
issues or the issue of debt, the Group considers not only its short-term position but also its long-term operational and
strategic objectives.
There have been no other significant changes to the Group’s management objectives, policies and processes in the year
nor has there been any change in what the Group considers to be capital.
Currency risk
The Group occasionally provides services in markets outside the UK. All material equity and financial liabilities are
contracted in Sterling and hence there is no significant currency risk.
©2015 Coms PLC | www.comsplc.com
55
27 Fixed asset investments
Details of the Company’s subsidiaries at 31 January 2015 are as follows:
Subsidiary
Comunica Holdings Limited
Redstone Converged Solutions Limited 3
Coms Media Limited 6
CloudXL Limited 6
CloudXL Networks Limited 6
CloudXL Support Limited 6
Coms.Com Limited
Coms Enterprise Limited
Coms Mobile Ltd
Premium O Limited 5
Superline Telecommunications Limited 1
Smarter Mobile UK Limited 7
Systems Online Limited 6
Actimax 1 Limited 6
Universal Office Automation Limited 6
Network Resource Limited 6
Network Resource Group Limited 6
Darkside Animation Limited 2
Clicks Media Limited 2
Cominica Group Limited 4
Place of
incorporation
and operation
Proportion
of ownership
interest
Proportion
of voting
power held
%
%
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Nature of business
Holding company
Infrastructure
Media
Telecommunications
Telecommunications
Telecommunications
Telecommunications
Telecommunications
Telecommunications
Telecommunications
Telecommunications
Telecommunications
Telecommunications
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
1 Superline Telecommunications Limited is a wholly-owned subsidiary of Coms Mobile Limited
(formerly ExchangeXT Limited)
2 Darkside Animation Limited and Clicks Media Limited are wholly-owned subsidiaries of Coms Media Limited
3 Redstone Converged Solutions Limited is a wholly-owned subsidiary of Comunica Holdings Limited
4 Comunica Group Limited is a wholly-owned subsidiary of Redstone Converged Solutions Limited
5 Premium-O Limited and Coms Media Limited are wholly owned by Coms.com Limited
6 All Actimax entities are owned by Coms Enterprise Limited.
7 Smarter Mobile UK Limited is owned by Coms Mobile Limited.
©2015 Coms PLC | www.comsplc.com
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Investment in subsidiaries
Cost
At 31 January 2013
Additions
At 1 February 2014
At 31 January 2015
Accumulated amortisation and impairment
At 1 February 2013 and 2014
Impairment charge
At 31 January 2015
Carrying value
At 31 January 2015
At 31 January 2014
At 31 January 2013
Total
£000
5,989
9,247
15,236
15,236
3,289
2,700
5,989
9,247
11,947
2,700
The carrying value of the investment at the year end represents Redstone, a wholly owned subsidiary. The impairment
charge recorded in the year of £2,700,000 reflects the write down in the carrying value of investment in the Telephony
Services businesses.
28 Post balance sheet events
On 26 May 2015 the Group announced the disposal of the business and certain assets of its Telephony Services
companies to Timico Limited for an initial consideration of £2.5m payable in cash and contingent consideration of
up to a further £1.0m payable in cash, based on the trading performance in the period to 30 November 2015. Completion
of the disposal took place on 31 May 2015.
The Group retained the benefit of its trade debtors; Timico assumed responsibility for all key supplier arrangements in
respect of trading following completion, however, the Group will retain certain liabilities, including the two leasehold
properties occupied by the Telephony Services businesses. Under a transitional services agreement, the Group is required
to retain the Stokenchurch office for up to six months post completion.
Following the disposal, the Group comprises Redstone and Darkside Studios.
After the sale of the Telephony Services businesses, the Group raised an additional £2.1m through a placing and open
offer before expenses. The placing issued 2,000,000 new ordinary shares at 0.5p per share with certain institutional
and other investors,including the Directors of Coms Plc, to raise approximately £1.0m before expenses. The open offer
involved the issue of 216,278,646 new ordinary shares at 0.5p per share to raise £1.1m before expenses.
©2015 Coms PLC | www.comsplc.com
57
29 Options and warrants
The Company had the following share options and warrants outstanding at 31 January 2015:
Warrants
Unapproved options
Warrants
EMI options
Warrants
Warrants
Warrants
Warrants
Warrants
Warrants
EMI options
Number
100,000
260,000
5,000,000
11,500,000
1,000,000
4,000,000
1,000,000
2,000,000
1,000,000
3,000,000
3,333,333
Unapproved options
23,040,000
Date granted
Price per share
Vesting period
20 May 08
20 May 08
18 Jan 13
20 Mar 13
10 Jun 14
12 Jun 13
12 Jun 13
30 Sept 13
10 July 14
10 July 14
1 Oct 13
1 Nov 13
50p
50p
0.75p
0.825p
5.0p
5.0p
5.0p
5.0p
6.0p
7.0p
3.0p
3.5p
20 May 08 – 19 May 18
20 May 08 – 19 May 18
18 Jan 13 – 17 Jan 15
20 Mar 13 - 19 Mar 15
10 June 14 - 09 Jun 23
12 Jun 13 - 11 Jun 23
12 Jun 13 - 11 Jun 23
30 Sept 14 - 29 Sept 23
10 July 14 - 09-July 24
10 July14 - 09 July 24
01 Oct 13- 30 Sept 15
01 Nov 13 - 31 Oct 15
30 Share based payments
The Company has issued warrants and options enabling the holders to subscribe for ordinary shares of 0.1p each.
Outstanding at start of year
Restated EMI Options
Granted during the year
Lapsed during the year
Forfeited during the year
Exercised during the year
Outstanding at end of year
Exercisable at end of year
2015
2014
Number
110,805,641
-
4,000,000
(1,814,689)
(44,626,667)
(13,130,952)
55,233,333
28,360,000
Weighted average
exercise price
1.80p
-
6.75p
5.00p
3.28p
0.90p
3.38p
2.74p
Number
29,450,876
(6,682,857)
187,712,033
-
-
(99,674,411)
110,805,641
17,269,927
Weighted average
exercise price
1.80p
1.80p
2.86p
-
-
3.22p
1.80p
3.90p
A charge of £54,000 (2014: £27,000) has been made for the share based payments.
The weighted average remaining contractual life of outstanding share options is 1005 days (2014: 608).
©2015 Coms PLC | www.comsplc.com
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If you would like to find out more.
Contact us:
Redstone
t: 0845 201 0000
e: salesenquiries@redstone.com
w: redstone.com
©2015 Coms PLC | www.coms.com
Darkside Studios
t: 020 7148 1500
e: sayhello@darksidestudios.uk
w: darksidestudios.uk
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