Innovative Software Direct plc

August 03, 2009 12:05 ET

Final Results for the 18 month period ended 31 December 2008

3 August 2009
                                 INNOVATIVE SOFTWARE DIRECT PLC ("ISD")

The  Directors  present the results for the 18-month period to 31 December 2008.  ISD acquired  Powerdial
Systems  Ltd  and  Powerdial  Services Ltd ("Powerdial") in December 2007 and  the  results  include  the
performance of Powerdial for a full 12 months.

Group  turnover  for  the  period was £2.20m and gross profit £1.11m.  The net loss  for  the  Group  was
£780,000,  of  which  £625,428  resulted from non-recurring transactions arising  during  and  after  the
acquisition  of  Powerdial;  professional and fundraising expenses,  changes  to  Powerdial's  accounting
policies and adjustments to the carrying value of certain assets.

The  directors have driven Powerdial's sales towards service income and long-term contracts.  This income
stream,  which  accounted  for 15% of Powerdial's turnover in 2007, amounted  to  45%  in  2008.   It  is
currently on target to fulfil the Directors' aim of growing it to 60% of total turnover in 2009, with the
goal of it exceeding operating costs in total by 2010.

The  Group has created the nucleus of a business with a solid infrastructure, the potential for a  robust
cash-flow model and excellent growth prospects.

ISD's  subsidiaries  focus on the provision of managed voice and data networks and, increasingly  on  the
provision  of  managed services and hosted solutions delivered over a network.  The  operating  companies

    -       IS Direct Limited - sourcing and marketing cutting-edge hosted solutions, and
    -       Powerdial who are specialists in networks, telephony and Voice over Internet Protocol (VoIP).

Powerdial has a portfolio of blue-chip clients including Jardine Motor Group, Transocean, Dickinson Dees,
Procter and Gamble, the Co-operative Group and the Legal Services Commission.

         In  parallel  with  its  historical base in hardware sales, which tend to  be  one  off  capital
purchases  by  customers, Powerdial has pushed aggressively towards service contracts, which  offer  long
term  revenue  streams from clients.  The drive towards service-based contract income had been  furthered

    -       Hosted Solutions, operated on Powerdial's own hardware.  These benefit Clients by replacing one-
        off purchases with monthly instalments, whilst simultaneously tying them more closely to Powerdial.

        Hosted solutions include "virtual telephone exchanges" for clients, Internet security  and
        filtering,  and  the  provision  of offsite data backup  and  instant  disaster  recovery.
        Environmental monitoring and energy conservation are being added.

    -       "One-Dial", where Powerdial purchases bulk calls and lines capacity at wholesale rates from the
        telephone network providers and re-sells them at retail rates to corporate customers.

        One-Dial's   overhead   requirement  is  low,  comprising  essentially   a   sophisticated
        computerised billing system.  Powerdial is in discussion with two of the Mobile  Telephone
        Networks with a view to offering a similar service for Mobiles.

Pre-booked  recurring  income  from service-based contracts has many of the  characteristics  of  annuity
income, because it is largely known 12 months in advance.  It greatly improves the quality of the  income
and reduces dependence on cash-flow constrained hardware.

IS  Direct  has  distribution  rights  for ZENmetrics? and ScanITT.   These  are  sophisticated  "Network
Discovery"  tools, allowing IT managers to identify the hardware connected to a network and the  software
running  on  it, and so enable better deployment of assets and improved network security.  IS  Direct  is
continually seeking further software solutions that can be promoted as "Software as Service".

In  anticipation  of  growth  and the evolution of the company from telephony  to  managed  service,  the
capability of the Board has been strengthened.   Phil Evans has joined in the executive capacity of Group
Finance Director.  Tony Drury and Clive Sawkins have been appointed non-executives.  Ian Byron and  Simon
Hersh have retired from the Board, which now comprises:-

    -   DOUGLAS JOHNSON POENSGEN -(non-executive Chairman) - Vice President of Strategy and Insight for
        BT Global Services.  BT Global Services has a current turnover of £8bn and delivers networked IT services
        to large corporate and government customers.  He was formerly a business unit director with Serco Group
        plc and partner at PA Consulting.
    -   PAUL FARN (Group CEO) - A long career in the sector and with considerable sales experience, he
        has been responsible for acquiring and developing all Powerdial's major customers.  As Group CEO, he
        still maintains all his senior customer relationships and leads major sales.
    -   PHILIP EVANS - BSc (Econ), FCA  (Group Finance Director) - now working with Private Clients, he
        was formerly a partner in the accounting firm Jennings Johnson through its acquisition by Tenon, and was
        latterly Tenon's NE Director of Corporate Finance.  He acted for Powerdial previously and has an intimate
        knowledge of the business.
    -   BARRY HERSH - Group Investment Director) - has 30 years of experience in Corporate Finance for
        smaller businesses.

    -   TONY DRURY - FCIB, MSI (Non-Executive Director) - is a present and past director of a number of
        PLUS Markets and AIM-listed companies.  He was the founder and former chairman of St Helen's Capital.
    -   CLIVE  SAWKINS(Senior Non-executive Director) - currently CEO of BCS Global, a  major
        telecommunications and networking company, and formerly Vice President at Cisco for Emerging Markets in
        Europe Middle East and Africa, Vice President at Avaya Communications Europe, Middle East and Africa, and
        before that with Unisys and Nortel.

The Board's priority is to ensure that the Group profits fully from the opportunities in its rapidly
evolving markets and thereby maximises organic growth in sales and profit.

The  secondary  priority is to leverage the Board's experience, contacts and expertise to make  carefully
targeted  acquisitions  that  can  be profitably added to the group, taking  advantage  of  the  seasoned
management infrastructure that it has acquired with Powerdial.

P Farn
Executive director for and on behalf of the board
28 July 2009

The following details are extracted from Innovative software Direct Plc Consolidated accounts for the  18
month period ended 31 December 2008 as audited by Tenon Audit Limited.




                                                            Notes                      PERIOD               YEAR
                                                                                        ENDED              ENDED
                                                                                  31 DECEMBER            30 JUNE
                                                                                         2008               2007
                                                                                          GBP                GBP
Turnover                                                                            2,169,272              1,340
Cost of sales                                                                     (1,056,120)            (1,490)
Gross Profit                                                                        1,113,152              (150)
Distribution costs                                                                      (120)            (2,545)
Administrative expenses                                                           (1,897,801)          (376,550)
Other operating income                                                                  5,173                  -
Operating Loss                                                                                                  
Excluding exceptional items                                                         (679,596)          (191,645)
Exceptional items                                             1                     (100,000)          (187,500)
Operating Loss                                                                      (779,596)          (379,245)
Interest receivable                                                                     3,056              1,754
Interest payable and similar charges                                                  (8,863)                  -
Loss on ordinary activities before taxation                                                                     
                                                                                    (785,403)          (377,491)
Taxation                                                                                5,019                  -
Loss for the financial year                                                         (780,384)          (377,491)

Loss per share undiliuted and diluted (pence)                                      (6.3)pence         (7.1)pence

                                                            Notes                       AS AT              AS AT
                                                                                  31 DECEMBER            30 JUNE
                                                                                         2008               2007
                                                                                          GBP                GBP
FIXED ASSETS                                                                                                    
Intangible assets                                             3                     1,146,822                  -
Tangible assets                                                                        13,728                  -
                                                                                    1,160,550                  -
CURRENT ASSETS                                                                                                  
Stocks                                                                                403,887                  -
Debtors                                                                               278,223              4,150
Cash at bank and in hand                                                                8,819             80,049
                                                                                      690,929             84,199
CURRENT LIABILITIES                                           4                     (994,590)          (144,254)
NET CURRENT LIABILITIES                                                             (303,661)           (60,055)
TOTAL ASSETS LESS CURRENT ASSETS/(LIABILITIES)                                                                  
                                                                                      856,889           (60,055)
PROVISION FOR LIABILITIES AND CHARGES                                                                           
                                                                                        6,000                  -
NET ASSETS/(LIABILITIES)                                                              862,889           (60,055)
CAPITAL AND RESERVES                                                                                            
Called up share capital                                                               252,580            203,697
Share Premium Account                                                               2,594,458            940,013
Share based payments reserve                                                           26,246             26,246
Profit & Loss Account                                                             (2,010,395)        (1,230,011)
SHAREHOLDERS' FUNDS/(DEFICIT)                                                         862,889           (60,055)

The  following notes have been extracted from the audited consolidated financial statements of Innovative
Software  Direct  Plc  and are re-produced below to provide additional clarity  and  explanation  of  the
financial information above.


                                                                                       PERIOD              YEAR
                                                                                        ENDED             ENDED
                                                                                  31 DECEMBER           30 JUNE
                                                                                         2008              2007
                                                                                          GBP               GBP
Exceptional administrative expenses                                                   100,000           187,500
Exceptional costs relate to the write down of the value of intangible fixed assets following impairment

The loss dealt with in the accounts of the parent company was £727,374 (2007: £435,589)


Additions                                                                                             1,187,452
As at 31 December 2008                                                                                1,187,452
Details of subsidiary undertakings are as follows:
Name of company             Holding                                 Proportion  Nature of business
                                                                    of nominal
                                                                      value of
                                                                   shares held
I S Direct Limited          Ordinary shares of £1 each                    100%  Software development and sale
Powerdial Systems Limited   Ordinary shares of £1 each                    100%  Sale, installation and
                                                                                maintenance of telephone
Powerdial Services          Ordinary shares of £1 each                    100%  Re-sale of telephone call time
All the above subsidiaries were incorporated in England and Wales

The  shareholdings are held directly by Innovative Software Direct Plc, except Powerdial Services Limited which
is a subsidiary of Powerdial Systems Limited.

The subsidiary undertakings acquired in the period contributed £28,405 to the Group's net operating cash flows,
paid  £8,746  in  respect of returns on investments and servicing of finance, received  £2,262  In  respect  of
taxation and utilised £4,649 for capital expenditure.

The  shareholding  in  Powerdial Systems Limited was acquired on 21 December 2007  but  due  to  the  Christmas
shutdown  the first post-acquisition activity of Powerdial Systems Limited and its subsidiary was on 2  January

                                                                                        AS AT             AS AT
                                                                                  31 DECEMBER           30 JUNE
                                                                                         2008              2007
                                                                                          GBP               GBP
Bank overdraft (secured)                                                              292,703            34,546
Trade creditors                                                                       134,440            68,710
Current corporation tax                                                                     -                 -
Other taxes & social security costs                                                    67,434                 -
Deferred Income                                                                       259,656                 -
Accruals                                                                               84,425            40,998
Other Creditors                                                                       155,932                 -
                                                                                      994,590           144,254

Yorkshire  Bank  have an unlimited debenture, dated 19 October 1994, over the undertaking,  property  and
assets of Powerdial Systems Limited.

HSBC  Bank  Plc  have an unlimited debenture, dated 21 October 2008, over the undertaking,  property  and
assets of Innovative Software Direct Plc an Powerdial Systems Limited.

HSBC  Bank  Plc  have an unlimited debenture, dated 16 October 2008, over the undertaking,  property  and
assets of I S Direct Limited.

No  security  is  given  by  any  of  the above assets of other group companies  with  regards  to  their

Deferred  Income  relates  to  maintenance income invoiced by the subsidiary  company  Powerdial  Systems
Limited during the year which relate to services to be provided in future periods.


On 16 January 2009, 310,000 ordinary shares with a nominal value of £0.01 per share were issued at a cash price
of £0.10 per share.

Notes to the announcement

1       Full  accounts for the Company for the year, which received an unqualified auditors' report  will
        be  posted to shareholders as soon as is practicable. The auditors have modified the audit report
        in relation to going concern and this report has been re-produced below:

2       The directors of the Company do not propose the payment of a dividend.

3       The financial information in this announcement has been extracted from the Company's audited

The following Emphasis of matter paragraph has been extracted from the
Independent Auditors' report to the shareholders of Innovative Software
Direct Plc

Emphasis of Matter - going concern

"In  forming  our  opinion on the financial statements, which is not qualified, we  have  considered  the
adequacy of the disclosures made in note 1 concerning the company's and group's ability to continue as  a
going  concern.  The company incurred a net loss of £727,374 and group incurred a net  loss  of  £780,384
during  the  period ended 31 December 2008 and at that date the company had  net current  liabilities  of
£203,128 and the group had net current liabilities of £303,661.  Although the company and the group  have
the  continued  support  of  its  shareholders, and the company in turn  is  continuing  to  support  its
subsidiary  undertaking, the financial statements indicate the existence of a material uncertainty  which
could  cast  doubt about the company and group's ability to continue as a going concern.   The  financial
statements  do not include the adjustments that would result if the company was unable to continue  as  a
going  concern. The financial statements do not include the adjustments that would result if the  company
and group was unable to continue as a going concern"

Note  1  to  which the above paragraph refers is detailed below and has been extracted from the financial

"The  Accounts  have been prepared on a going concern basis as it is anticipated that  through  continued
support of the directors and shareholders the group will continue for the foreseeable future and be  able
to  meet  all liabilities as they fall due. The losses incurred in the period have largely resulted  from
non-recurring  transactions  arising during the acquisition of Powerdial,  professional  and  fundraising
expenses  and adjustments to the carrying value of certain assets. In addition, although the company  and
group have net current liabilities at the balance sheet date a significant component of these figures  is
represented by intercompany balances and deferred income provisions respectively. Although the group  has
faced  challenging  economic conditions during the early part of 2009 the signs  of  improvement  in  the
market  for  hardware sales and the continued drive to grow service income, together with a strengthening
of  the  Board, lead the directors to be confident of the appropriateness of the going concern basis  for
the preparation of the accounts"


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