2ergo - Annual Report Year 2009

Annual Report + Accounts 2008/2009
Digital leaders in a mobile world
Contents
04 06 08 09 14 16 18 20 22 24 26
Highlights About 2ergo Chairmans Statement Management Review Solutions and Services Interactive Messaging Mobile Internet and Publishing Smartphone Applications Mobile Ticketing and Coupons Mobile Security and Advanced Messaging Business Partner Programme
34 37 38
Directors Report Statement of Directors Responsibilities Report of the Independent Auditor to the Members of 2ergo Group plc (on the Consolidated Financial Statements) Consolidated Income Statement Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement Notes to the Consolidated Financial Statements Report of the Independent Auditor to the Members of 2ergo Group plc (on the Company Financial Statements) Company Balance Sheet Notes to the Company Financial Statements Company Information
39 40 41 42 43 64
65 66 70
03
Annual Report + Accounts 2008 / 2009
Highlights
Gross profit from direct sales and enhanced Business Partner Programme up 26% to 10.1 million, increasing overall gross margin from 30% to 48%, ahead of expectations Strategy to reduce exposure to high-volume low-margin wholesale distribution business seeing continuing success EBITDA, before impairment of initial investment in Broca plc, up 21% from 4.1 million to 5.0 million Americas region reports first profits Expansion into Asia and Australia and broadening of product set through acquisitions
Growing number of global clients Market leading product set starting to be rolled out across all regions Completed buy-back of 1 million 2ergo shares into treasury, at a cost of 1.4 million Cash reserves of 6.4 million at the year end and debt free Ideally positioned to reap significant benefits from investment in additional sales, marketing and support resources in order to drive turnover growth across all geographies
Gross profit from direct sales and enhanced Business Partner Programme up 26% to 10.1 million
SO
LD
SOLD
SO
LD
Expansion into Asia and Australia and broadening of product set through acquisitions
3.223m
2007
4.968m
2009
4.104m
2008
2.726m
2006
9.87p
2009
8.54p
4.968m
2009
2008
4.104m
2008
6.89p
2006
6.74p
2007
3.223m
2007
2.726m
2006
EBITDA (m) Earnings before interest, tax, depreciation, amortisation and impairment of initial investment in Broca
9.87p
2009
Adjusted basic earnings per share (pence)

1
Stated after applying 2008 effective tax rate to 2007 EPS
8.54p
2008
6.89p
2006
6.74p
2007
05
About 2ergo
2ergo is a leading international provider of mobile enabling technology for marketing, business, entertainment and media. Its product portfolio includes an innovative suite of interactive messaging, mobile publishing, content management, smartphone applications, mobile ticketing and coupons, mobile security and advanced messaging solutions to deliver a multi-dimensional approach. Wrapped around the product suite are professional managed services to help organisations develop and execute their mobile strategy. 2ergo enables global businesses, brands, marketing agencies, publishers and mobile network operators to take advantage of integrated mobile communications to increase sales, enhance customer experiences, mobilise business processes and reduce costs. Many leading global brands have recently adopted 2ergos product set and are benefiting from more targeted and personalised communications with their customers via the mobile channel. Key to 2ergos success is its core enabling technology platform Multiserve. A result of over ten years of mobile product evolution and significant research and development, Multiserve comprises a unique set of technologies which form the intelligence and billing layer between network operators, the Internet and customerfacing applications.
Built with flexibility at its core, Multiserve seamlessly integrates voice, data, text, email, video and mobile Internet channels to form a powerful yet agile nucleus. This intelligent core enables 2ergo to rapidly develop and launch a wide range of integrated and innovative customer-facing products and services for mobile marketing, business, entertainment and media. Its flexibility also ensures that 2ergo can respond quickly and efficiently to changing market conditions and customer needs. Headquartered in the UK, 2ergos international presence spans Europe, North America, Latin America, Australia and India and a partner network in China. The Group currently employs over 150 people, with offices in Manchester (head office), London, Washington, New York, Buenos Aires, Sydney, New Delhi and Mumbai.
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About 2ergos customers The Groups customers include well-known brands, mobile network operators, marketing agencies, media brands and organisations in the financial services, retail and travel sectors, amongst other industries. The long list of organisations which utilise 2ergos products and services include: The UKs three largest mobile network operators O2, Orange and Vodafone Dallas-based MetroPCS Communications and AT&T, the second largest mobile network operator in the United States The Australian Broadcasting Corporation (ABC), an Australian public broadcaster which provides television, radio, and digital online services FOX News, a cable and satellite news channel that is part of News Corporation, one of the worlds largest media conglomerates Internet search and services provider Yahoo! Procter & Gamble, the Fortune 500 multinational manufacturer of consumer goods Ladbrokes, world-leader in the global betting and gaming market Rightmove, the UKs number one property website Through the Business Partner Programme 2ergo has established relationships with some of the worlds most respected marketing and advertising agencies, including Ogilvy & Mather, BBH and McCann Erickson, as well as market research leader Kantar Operations.
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Chairmans Statement
I am pleased to report another very strong year for 2ergo. The strategy to focus on direct sales and the enhanced Business Partner Programme is paying dividends and the Groups gross profit margin has increased from 30% to 48% as a result of the move away from the wholesale reseller business. Earnings before interest, tax, depreciation, amortisation and impairment charges for the year have increased from 4.1 million to 5.0 million, a rise of some 21%. 2ergo has continued to enjoy organic growth and, despite the global economic downturn, during the period the Group has completed three key strategic acquisitions adding new products, new technological innovations and an extended pool of quality people with significant expertise in the industry. Crucially, the Board believes that these acquisitions will provide the Group with extensive geographical reach into some of the fastest growing world markets. In April 2009, 2ergo completed the acquisition of Broca plc, with patented technology for end-to-end security over multiple mobile communication protocols. In May 2009, the Group acquired Australian-based Wapfly Technologies, whilst July 2009 saw 2ergos expansion into India following the acquisition of Activemedia Technologies, leading providers of mobile ticketing and couponing with offices in New Delhi, Mumbai and London. The Group chose these technology-rich acquisitions in strategically important regions as part of its plan to expand the business globally and to better serve its blue chip clients who are increasingly eager to reach the whole addressable mobile market on a global scale. These three key businesses have a strong future and 2ergo is committed to helping them realise their full growth potential. This year, the Group will make substantial further investment in people, technology and operations to complete the integration of the acquisitions and globalise its products and solutions.
Over the past 10 years, 2ergo has delivered impressive growth which has put the business in a market leading position. To further accelerate the Groups growth, the management team has been strengthened by the appointment of high-quality people who have proven and wide-ranging experience in building successful businesses and in integrating acquisitions. I am confident that we have the best team, with the right skills, to execute our plans and take the business to the next level. The Groups innovative technology and services have been developed to scale with the business. The mobile market is growing beyond the early predictions, and with continued investment and sound leadership, 2ergo looks forward to executing its very exciting strategy. Keith Seeley, Chairman
08
Management Review
Financial performance The strategy announced by the Board last year to focus on higher-margin direct sales and the enhanced Business Partner Programme and reduce the Groups exposure to low-margin wholesaler-introduced business has continued to pay dividends, as follows:
Group overheads for the year, before impairment charges, were 7.3 million (2008: 6.8 million). The increase in overheads reflects the investment made by the Group during the year in strengthening the management team and product set to capitalise on the growing global opportunities for 2ergo. This investment, together with investment in the recent acquisitions, will continue into the coming year as the Board seizes the vast opportunities for the growth of 2ergo. Group operating profit, before impairment charges, rose to 3.6 million (2008: 3.0 million), an increase of 19%. The impairment charge of 3.2 million arose in the first half of the financial year, when 2ergo held a 19.2% interest in Broca plc which was accounted for as an available for sale investment. In accordance with the principles of IAS 39, the carrying value of the asset was required to be written down to the quoted share price of Broca plc, giving rise to the impairment charge of 3.2 million through the income statement for the 6 months to February 2009. Subsequent to the half year, 2ergo completed the acquisition of the remaining share capital of Broca plc. The goodwill arising on the acquisition of the entire 100% interest in Broca plc is 6.8 million (including 3.2 million in relation to the initial 19.2% holding). This is supported by its value in use and is not considered to be impaired. In terms of overall net asset values, the impairment charge arising in the first half of the year has been reversed in the second half, but IAS 39 requires that the reversal of the original charge is not put through the income statement. The overall impact is that while the income statement includes an impairment of 3.2 million in respect of the previously held available for sale investment, the subsequent acquisition accounting is such that the impairment is reversed within the balance sheet and reinstated within goodwill. EBITDA before impairment charges grew by 21% from 4.1 million to 5.0 million. Of the amortisation charge for the year, 0.1 million was in respect of acquisitions made by the Group. Profit before tax and impairment charges was 3.8 million compared to 3.4 million in 2008, an increase of 11%. After the goodwill impairment charge of 3.2 million, the profit before tax was 0.6 million (2008: 3.4 million).
Revenue Direct/Business Partner Wholesale Reseller Channel
2009 000 11,720 10,973 22,693
2008 000 9,071 23,494 32,565
% Change +29% -53% -30%
Gross Profit Direct/Business Partner Wholesale Reseller Channel
2009 000 10,058 829 10,887
2008 000 8,013 1,756 9,769
% Change +26% -53% +11%
Total revenue for the year was 22.7 million, compared to 32.6 million in 2008. This reflects the Groups strategy of reducing business from its wholesale reseller clients, with revenue from this area now 11.0 million (2008: 23.5 million). Gross profit from these wholesale services was 0.8 million (2008: 1.7 million), a reduction of just 0.9 million. Conversely, gross profit generated by the redeployment of resources from the delivery of wholesale services into the delivery of direct and Business Partner Programme sales increased by 2.1 million in the year, validating this strategy. Revenues generated through direct sales and business partners increased from 9.1 million to 11.7 million, a rise of 29%, whilst gross profit grew by 26%, up from 8.0 million in 2008 to 10.1 million this year. Gross margins in this area remained consistently high at 86% (2008: 88%). Total Group gross profit for the year rose from 9.8 million to 10.9 million, with overall Group gross margins growing from 30% to 48%. The focus on selling direct to customers or through sophisticated business partners means that by understanding the needs of its customers better, 2ergo is well positioned to generate significant increases in revenue. Also, crucially, the Groups increased reach offers the opportunity to sell its products and services to existing customers in new regions.
09
The effective tax rate for the year, based on profit before the impairment charge, was 21% (2008: 26%), and basic earnings per share, before goodwill impairment, was 9.87p, compared to 8.54p in 2008, an increase of 16%. Net assets at the year end stood at 23.5 million (2008: 16.1 million). Cash of 3.5 million was generated from operating activities, compared to 1.2 million in 2008. Following the purchase of 1 million 2ergo shares into treasury, together with continued investment into technology and product development and the completion of the acquisitions, cash balances at the year end were 6.4 million (2008: 9.1 million). The Group will consider opportunities to buy back further shares as and when appropriate. The Group has continued its progress in the Americas region during the year, with revenue growth to $3.7 million (2008: $2.5 million) an increase of 48%. The Board is delighted that 2ergo Americas reports a profit for the first time this year, with $365k being generated, compared to a loss of $955k in 2008. This represents a turnaround of some $1.3 million. Now that the Groups model in the Americas has been proven, the Board is fuelling growth in that region, with investment since the year end which includes a new regional managing director and senior sales staff. The Board believes that over the coming years this investment will allow 2ergo Americas to grow significantly.
During the year 2ergo completed the acquisition of Broca plc, Wapfly Technologies Pty Limited and Activemedia Technologies Limited (AMT). All of these acquisitions are technology-rich companies, who are either pre-revenue or in early stages of revenue generation. The contribution of these acquisitions to both revenue and profitability this year has been minimal but, with continued investment during the new financial year, all are expected to contribute to profitability by the end of 2009/10. It is the Boards intention to develop these businesses in a similar manner to 2ergo Americas, which is now demonstrating significant underlying value following its successful turnaround. At the year end, these acquisitions were valued within intangible assets at 17.1 million, with deferred consideration estimated at 7.0 million. The deferred consideration in respect of AMT is an estimate based on management forecasts, calculated as 4 times AMT India profit after tax and 2.8 times AMT UK operating profit for the year to 31 August 2012, which will be payable between November 2009 and November 2013, dependent on AMT achieving agreed levels of financial performance and subject to an overall consideration cap. Consideration will be settled, at the discretion of 2ergo, by the issue of new 2ergo ordinary shares or loan notes. Consideration for the acquisition of Broca plc was satisfied by the issue of 0.0909 of a 2ergo share in exchange for each Broca share, whilst the Wapfly consideration was settled in cash after the year end. Details of the values attributable to each acquisition in terms of asset value and deferred consideration are shown in note 18 to the consolidated financial statements. The Groups cash position, its debt-free status, its increased global footprint in high-growth geographies and its awardwinning product set mean 2ergo is ideally positioned to enter its next growth phase with confidence.
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Operational review During the year, the Group has continued its strategy of increasing its global footprint to capitalise on the boom in mobile services in some of the fastest growing regions in the world. In early 2009, 2ergo relocated its global headquarters to the centre of MediaCity UK in Manchester. MediaCity UK is fast becoming a significant international hub for the media and creative industries, with the UKs leading broadcast, media and technology companies at its heart. Following its recent acquisitions, the Group now has offices in Manchester, London, Washington, New York, New Delhi, Mumbai, Sydney and Buenos Aires and employee numbers have increased from 82 to over 150 during the year. In April 2009, 2ergo acquired Broca plc and its patented technology for end-to-end security over multiple mobile communication protocols. This technology provides secure data transfer solutions for mobile phone and wireless networks and has particularly strong potential in emerging markets such as Asia, Africa and South America to facilitate secure mobile payments, money transfers and banking solutions. The Board is pleased with the progress made since acquisition in integrating the Broca technology into 2ergos product set, and with the opportunities developing in the sales pipeline. The acquisition of Australian-based Wapfly Technologies Pty Limited, in May 2009, is part of a move to extend the Groups reach into the Asia-Pacific region. 2ergo is now making great headway in the mobile marketing and broadcast sectors in Australia, and once the migration of its full product range into the region has been completed in 2009/10, the Group will become active in other core sectors. 2ergo now serves, amongst others, media giant ABC (Australian Broadcasting Corporation) with its mobile Internet and smartphone applications. In July 2009, the Group expanded into India following the acquisition of Activemedia Technologies Limited, with offices in New Delhi, Mumbai and London. 2ergo now provides mobile value added services and solutions in India, and is a leading supplier of mobile ticketing and couponing, delivering the couponing redemption technology behind the highly successful Orange Wednesdays campaign in Europe. This acquisition holds vast potential and gives 2ergo access to one of the worlds fastest growing mobile markets. There were 472 million mobile subscribers in India as at 30 September 2009, and with subscriber numbers increasing by 15 million in September 2009 alone (source: Telecom Regulatory Authority of India), the acquisition opens up a vast audience to 2ergo and its clients. In addition to the increased geographical reach afforded to 2ergo as a result of these acquisitions, each brought to the Group experienced staff and management, together with significant additions to the Groups product suite. Since the acquisitions were completed, 2ergo has invested significantly in incorporating these new products into its existing award winning product set, and in readying them for the roll out of all products across all regions throughout the coming year.
Global product consolidation will enable organisations to seamlessly move between 2ergo products thus enhancing their mobile offering and increasing sales and customer loyalty. This investment will continue into 2009/10 and is expected to generate significant revenues during the latter part of that year and subsequent years. An example of the success the Group has had in the year following this investment in its technology has been with its mobile Internet and smartphone applications product lines, enabling organisations to launch engaging interactive services across smartphone platforms such as Apple iPhone, Google Android, Blackberry and Windows. Some key projects undertaken during the year include the Rightmove application, the FOX Business Smartphone application in the US and the ABC application in Australia. Customer retention rates continue to run close to 100% and established clients such as O2, AT&T and leading media brands are increasingly helped by 2ergo to grow their mobile services, once again proving the strength of 2ergos product set. In addition to numerous high profile client wins, the Group has secured relationships with business partners such as Ogilvy & Mather, McCann Erickson and BBH in the UK and Group M and Kantar Operations (part of WPP group) globally. 2ergo also made pleasing progress in the Americas region during the year, reporting its first profit and expanding its network operator and media relationships by delivering new services for customers such as AT&T and National Geographic Channel and adding MetroPCS to its customer base. The Groups relationships with leading household names such as Procter and Gamble also continued to grow and 2ergo now provides solutions for them in India as well as Latin America, as a direct result of the Groups increased geographic presence. Recent services have included mobile loyalty campaigns for leading brands such as Gillette and Pampers utilising 2ergos mobile couponing services. To support this growth, the Group has appointed a new Managing Director of 2ergo Americas who is a recognised and well-respected figure in the mobile communications industry. Following the Groups launch into India, 2ergo is quickly establishing itself in that region, being selected by one of Indias largest network operators as their mobile couponing partner. Similar progress is being made in Australia, where investment has been made in expanding the sales, technical and operational support teams, the benefits of which are already starting to be seen as a healthy pipeline continues to develop in that region. The Group is also benefiting from reduced operating costs and improved efficiencies as a result of migrating certain development functions to India and South America.
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Markets and opportunity for growth As global awareness and consumer appetite for mobile services continues to rise, the opportunity for significant growth for 2ergo is excellent. There are now over 4 billion mobile subscribers in the world, equating to a global market penetration of 61.1% (source: International Telecommunication Union), and the pace of growth is faster than any other technological development in history. Of these subscribers, 2 billion are capable of accessing the mobile web from their handset. This compares with only 1 billion PC/laptop users being able to access the Internet, 1.5 billion TV subscribers and 1.2 billion fixed line telephone users (source: Google In Mobile 2009). Moreover, with fixed line Internet access in developing countries being limited and, if available, often slow and expensive, the growth of global mobile services, mobile banking and mobile commerce is assured. The Groups proven technology means that it is ideally placed to exploit this demand.
Investment strategy As the penetration of high-tech handsets increases, the growth of mobile services and use of 2ergos services follows. The Board therefore believes that the time is right to make significant investment in the Groups ability to deliver these services on a larger scale. The Board has considered a range of potential capital acquisitions of established businesses in order to gain greater scale. It now believes that investment in the Groups existing operations, including its recently acquired businesses, is the best means by which to achieve the operational scale required to fully capitalise on the opportunity for significant growth. Investment will be made in the following: Additional sales and marketing staff in order to drive growth in revenue across all geographies Technical support staff in order to ensure consistency of service across a larger customer base through standardisation and globalisation of 2ergos products and services Corporate processes and structures in order to ensure the effective operation of the enlarged multi-geographical Group Technology in order to ensure robust global delivery of services This investment and the ramp-up of the scale of the Groups operations will predominantly take place during the first half of 2009/2010 and will result in a materially increased overhead to be supported by the Group. It is anticipated that the investment will be funded out of existing cash reserves. Staff numbers are expected to increase from 152 at the end of August 2009 to 240 during the year to August 2010, resulting in an expected increase in the annual overhead charge for the year to 31 August 2010 as follows:
Description Additional sales and marketing staff costs Full year staff costs within Wapfly, AMT and Broca Additional technical staff costs Additional staff costs to support enlarged group Other staff cost increases Total staff cost increases Non-staff overheads from acquisitions Incremental operating costs arising from capital investment Additional operating costs for enlarged group Total other cost increases Total forecast increase in overhead for the year to 31 August 2010 m 2.1 1.4 1.0 0.3 0.4 5.2 0.8 0.5 0.6 1.9 7.1
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Future trading 2ergo has already started to see growth from the migration of its existing products into all geographies with sales of its services into new and existing customers. The Groups pipeline of potential new business from blue chip companies has never been stronger, and 2ergos existing well proven revenue model of charging upfront development fees, monthly service annuity fees and transactional fees is now being successfully established in all geographies. Following the investment to be made in scaling the business, the Board expects a considerable increase in long term annuity revenue to be seen in the latter part of 2009/10. This should lead to significantly increased revenues, gross profits and operating profits across all territories in the financial year 2010/11. Outlook The market-size statistics alone confirm that wellestablished and proven companies within the mobile market are set to benefit from the inevitable commercial growth of the mobile industry and, in particular, data services. The Board believes that 2ergo is best placed to lead the market with its unique full-service solution. Proven and used by an ever increasing number of world leading organisations, the Groups suite of self-service products gives its blue chip customers the holistic approach to mobile marketing, customer relationship management and the mobile entertainment and media they demand. It is against this backdrop of a rapidly growing market, coupled with strong management, a clear strategy, an established global footprint and a healthy new business pipeline that 2ergos outlook has never been stronger.
Solutions and Services

2ergos solutions and services enable multinational businesses, mobile network operators, content owners and business partners to take advantage of integrated mobile technology to increase sales, mobilise business processes, reduce costs and enhance customer experience. Through 2ergo, more and more organisations are leveraging the unique characteristics of the mobile channel in order to attract and retain customers and generate new revenue streams through existing and emerging technologies such as smartphone applications, mobile banking and mobile commerce. 2ergos solutions cover all aspects of mobile technology and are device, network and protocol independent. 2ergo Multiserve At the heart of 2ergos product portfolio is the Multiserve platform; a result of over 10 years research and development, it is a unique set of technologies that form the intelligence and billing layer between network operators, the Internet and customer-facing applications. Built with flexibility at its core, Multiserve seamlessly integrates voice, data, text, email, video and mobile Internet channels to form a powerful yet agile nucleus. This intelligent core enables 2ergo to effortlessly develop and launch a wide range of integrated and innovative customer-facing mobile business, mobile marketing and mobile entertainment products and services. Its flexibility ensures 2ergo can respond quickly and efficiently to changing market conditions and customer needs. Sophisticated reporting and management information Underpinning all of 2ergos products and services is a sophisticated reporting and analytics engine that enables organisations to gain a greater insight into their customers behaviour. Accessed through a common user interface, it provides organisations with a true 360 degree view across all customer touchpoints. It enables organisations to assess the success of each communication channel and to build a customer profile based on the responsiveness to each customer interaction, taking into account the best time of day to establish communication, the best method of communication, with what frequency, and to what content they are most receptive.
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Smartphone Applications
Android iPhone Blackberry Symbian/Java Windows
Interactive Messaging
Campaign Manager Mobile Messaging Manager SMS2Email Broadcast SMS/MMS
Mobile Internet & Publishing

Mobile Site Builder Content Management Video Streaming Device Rendering
Mobile Ticketing & Coupons Mobile Security & Advanced Messaging

Secure Advanced Messaging Service mBanking, mPayments and mCommerce Secure Mobile Communications Network Operator Bill and Pre-pay Account Payments VoucherNet Ticketing Platform POS Redemption QR Codes Bluetooth
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Interactive Messaging
2ergos Interactive Messaging solutions allow organisations such as mobile operators and brands to create and send personalised communications via text message, picture message, voice, email and mobile Internet, from one source to audiences ranging from hundreds to millions. The carrier grade interactive campaign delivery platform is used by the likes of O2, AT&T and Ladbrokes to engage with customers throughout the customer lifecycle, including customer acquisition, satisfaction surveys, polls, competitions, market research, time-bound loyalty vouchers, upgrade management and promotional activity. Optimised marketing campaigns In a crowded marketplace, marketers are constantly looking for new ways to reach out to customers. 2ergos Interactive Messaging solutions can be used to create and run sophisticated, creatively-rich mobile marketing and promotional campaigns that capture the attention of target audiences. They can be used by brands and their agencies to take customers on an interactive journey via text (SMS), multimedia messaging (MMS), mobile Internet and email. The solution can be used to personalise interactions, schedule delivery times and engage in a two-way dialogue, ensuring communications are more targeted, more relevant and ultimately more effective. Numerous 2ergo case studies have illustrated powerful response rates upwards of 25 per cent, yet at a fraction of the cost associated with traditional marketing channels. Customer relationship management The mobile phone presents one of the most targeted, cost effective and timely ways to communicate with customers. 2ergos Interactive Messaging solutions can be used by organisations to create, execute and track mobile customer relationship management (CRM) campaigns to communicate more effectively and conveniently with customers and staff via text message, picture message, mobile Internet and email. Whereas traditional forms of customer contact can be costly or deliver low response rates, 2ergos solutions are proven to significantly increase customer satisfaction and reduce customer contact strategy costs by as much as 30 per cent. They can be used to mobilise inbound customer care channels, effectively allowing customers to self-serve. Frequently asked questions, balance enquiries and account transfers are just some of the routine communications that can be automated through 2ergos mobile enabling technology. Media engagement Media and entertainment brands can engage audiences with rich interactive services such as competitions, voting, chat and games. 2ergos Interactive Messaging solutions enable brands to deliver multimedia information services to strengthen relationships with their clients, increase brand awareness and generate additional revenue streams. Examples include subscription-based news alerts, mobile video streaming and community-based mobile Internet portals. Reporting and management information Underpinning 2ergos Interactive Messaging solutions is advanced reporting and business intelligence. The real-time analytical reporting enables organisations to assess the success of each communication sent and to build a customer profile based on the responsiveness to each campaign.
People currently send two trillion messages per day worldwide.

In-Sat
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Fans sent nearly 40,000 SMS messages to opt in to the campaign, and the tours mobile site received an impressive 75,000 page views.
Jennifer Erdman, Senior Manager at AT&T Youth Marketing
Case Study: AT&T
The Challenge As one of the worlds leading telecoms brands, AT&T is dedicated to providing high-quality services to its subscribers. As part of this commitment, AT&Ts Youth Marketing Group was looking for a compelling way to reach its core audience of music-loving customers via their mobiles. The Groups goal was to support a range of live music events through interactive messaging and mobile Internet solutions designed to add value to the customer experience. To achieve this, AT&T Mobility needed a comprehensive mobile marketing platform that would simplify the distribution of relevant content and information in a unique and entertaining fashion via mobile a key medium in the companys diverse marketing mix. The Solution AT&T realised that 2ergo could deliver a full mobile package to engage AT&T customers according to the individual needs of each campaign. 2ergo prepared a full range of mobile-enabled options for a number of AT&T campaigns, tailored to the companys specific objectives. As an example, an SMS messaging campaign supported by a mobile website was created to promote the annual Vans Warped Tour concert tour, where customers could receive individually tailored pre-show texts offering exclusive content tied to their local Vans Warped Tour stop. 2ergos technology also made it possible for AT&T to send promotions and offer downloadable music content exclusively to its subscribers, thus enriching AT&T subscribers experiences at the events. The Results 2ergo enabled AT&T to engage with its target customers in ways that had not previously been possible. The added value and improved customer experience introduced AT&T to a previously untapped world of potential for engaging new, young consumers with practical information and useful content. Vans Warped Tour fans sent nearly 40,000 SMS messages to opt in to the campaign, and the tours mobile site received an impressive 75,000 page views. Following the project, AT&T remains committed to using mobile marketing to reach its subscribers and recognises the value of combining the use of SMS campaigns with mobile websites to provide consumers with an interactive, engaging and informative experience.
Multi-channel mobile marketing campaigns add value to customer experience
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Mobile Internet and Publishing

The mobile Internet enables organisations to extend their traditional online presence to a mobile web environment for interaction. In the UK mobile Internet growth is currently eight times greater than PC-based growth, driven by the popularity of smartphones, flat rate data plans, faster network speeds and changing consumer behaviour (source: Nielsen Research). In many developing nations consumers are leapfrogging fixed line access and choosing mobile as their primary experience, driving demand even higher. This shift presents a wealth of opportunities for global brands to extend their geographical reach and interact with domestic consumers on the go. The true value of the mobile web becomes clear when businesses start to take advantage of location-based services and engage with consumers in the moment; for example the ability for retailers to interact with consumers at the point of purchase is extremely powerful. 2ergo has developed mobile Internet sites for some of the worlds most influential brands including Rightmove, the Australian Broadcasting Corporation (ABC), FOX News, AT&T, American Idol, NBC Universal and Uno Medios. In 2009, 2ergo partnered with global marketing and advertising agency, Ogilvy & Mather, to mobilise the Hopenhagen initiative, helping millions of people to participate in the landmark movement. Recognised as market leading, the success of these sites lies in the fact that they provide a high-quality, consistent experience which has been optimised for the mobile user. High-end mobile publishing and content management solution 2ergos high-end mobile publishing and content management solutions can be used by marketing and creative teams to quickly establish a mobile presence or manage updates. The suite of products can be used by brands and agencies to quickly develop a mobile web presence, either via 2ergos powerful site building tools or through a managed service team utilising inhouse creative and production facilities. The technology seamlessly integrates with existing content management systems and enables content repurposing to ensure 2ergo mobile Internet sites render elegantly on all mobile devices. Organisations can track customer usage and key metrics with 2ergos intuitive yet sophisticated analytics and reporting package. Rich analytics relay in-depth consumer insight including popular handsets, unique visitors and page impressions for ongoing site optimisation.
The mobile Internet is predicted to grow from 577 million users in 2008 to 1.7 billion users in 2013.
www.watblog.com
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The ABC is already a leading provider of digital media content in Australia. The ABC Mobile suite provides another way for Australians to access reliable, quality content wherever and whenever they choose.
Chris Winter, Manager, New Services at the ABC
Case Study: Australian Broadcasting Corporation (ABC)
The Challenge The Australian Broadcasting Corporation (ABC) is an Australian public broadcaster which provides television, radio and digital online services. It is funded by the Australian Federal Government and received AU$ 858 million in 2009. The ABC needed technical expertise to launch its new mobile services portfolio, aimed at extending audience reach within the mobile space. It was also essential that the mobile site and applications loaded quickly and provided a seamless user experience to its customers. The ABC needed the advice of a global mobile services provider with the scale and knowledge to produce a content-rich mobile service for a large audience. It therefore contracted 2ergo to develop ABC Mobile (msite and selected applications for iPhone, Android, BlackBerry and Java based platforms). The Solution 2ergo deployed its mobile site creation and content management system (CMS) to deliver a fully integrated location-based mobile site along with Apple iPhone, Java and Android applications for the ABC. Page designs and layouts produced by the ABC were ingested into the system along with ABC content feeds. Images used on ABC News stories can now be repurposed on the move, by the CMS, to eight different mobile handset profiles, giving audiences up-to-the-minute information whilst out and about. Rich analytics reports are also provided, equipping the ABC with information regarding audience usage and behaviour across the different properties. The Results ABC Mobile (m.abc.net.au) received 2.2 million page views from December 2008 to June 2009. The ABC iPhone application registered over 140,000 downloads in its first four months of distribution, and ranked number one Top Free Application in the iTunes App Store in its first week of release.
The ABC uses mobile site and applications to engage audiences whilst on the move
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Smartphone Applications
The popularity of smartphones has opened up a completely new marketing and brand-building channel for organisations looking to interact with mobile users on a truly one-to-one basis. Downloaded directly to the phone, mobile applications leverage and interact with the unique features of the handset operating system to give consumers a richer experience. As well as text, images, video and interactivity, they can include advanced features such as locationbased services, augmented reality, push notifications or user preference settings to give users a more personal experience. The most successful branded applications take advantage of these features to interact with consumers and engage in a way that has not been possible before. Leading class smartphone applications 2ergo is a leading developer of smartphone applications including Apple iPhone, Google Android, Java/Symbian environments, Blackberry and Windows. Its application framework ensures leading usability as well as seamless integration into the wider 2ergo suite to realise consolidated reporting and analytics. With considerable expertise in developing information and specialised brand applications, 2ergos smartphone development centre has built some of the worlds most innovative applications including those for Rightmove, Arsenal Football Club, the ABC (Australian Broadcasting Corporation) and FOX Business. The Rightmove application reached number one in the iTunes App Store download charts in the first week of release, and has received more than 1,800 positive reviews from users. It was downloaded 150,000 times in its first month with an average of 55,000 searches performed every day. Both Rightmove and Arsenal Football Club have recently made the iTunes Best of 2009 chart, featuring within the top 30 Best of 2009 and Top Sellers charts respectively.
50% of users of the myTouch 3G/HTC Magic visit the Android Market at least once per day. Around 80% browse the web on their devices multiple times a day.
Brodman
Over two billion downloads from Apple App Store since launch, and 50% of iPhone users purchase paid for apps once or more per month.
Apple
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Rightmoves application receives over 55,000 searches per day and has delivered 60,000 agent email leads to date.
Miles Shipside, Commercial Director at Rightmove
Case Study: Rightmove
The Challenge As the UKs number one property website, Rightmove wanted to be the first to provide an innovative, functional and engaging mobile application that would offer millions of iPhone users access to extensive property search functionality while on the move. Capitalising on the evolution of pervasive mobile Internet use, Rightmove saw the application as a way to extend the exposure of its agents whilst changing the face of househunting with a more convenient and dynamic approach. The application needed to incorporate the websites functionality whilst taking advantage of cutting-edge location-based technology to allow house-hunters to search for properties in their immediate vicinity, in addition to the traditional area-specific search tool. The Solution Building on its extensive global brand and smartphone application development expertise, 2ergo provided a solution that offers sophisticated functionality for access to a wide array of information, whilst on the move. The application allows mobile users to search for properties by keying in their postcode or by using the real-time GPS technology embedded in the iPhone to search their current location. Photos and maps for over 950,000 UK sales or rental properties can also be accessed with built-in sharing capabilities, allowing users to send prospective properties to friends via email and call agents directly from the application. Users can also access address and agent details, prices and images and save search filters. The Results The application empowered Rightmove to make house-hunting even easier for its millions of users and revolutionised the house-hunting process for customers that use its property search. On average over 55,000 searches are performed per day. As the first application of its kind, it arms customers with a practical property search tool and provides Rightmoves agents with extensive exposure. From project inception to completion, launching the Rightmove application took only six weeks, ensuring Rightmove maintained its market lead and first-mover advantage. The application reached number one in the iTunes App Store in its first week and has had over 275,000 downloads to date. It now receives over 55,000 searches per day and has delivered 60,000 agent email leads. 21
Creating the number one ranking iPhone property application
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Mobile Ticketing and Coupons

2ergo offers a complete mobile ticketing, coupon and customer loyalty solution that is proven to enhance brand value and improve customer retention. A complete endto-end solution, it enables organisations to distribute digital coupons, vouchers and offers via the mobile phone, and then redeem, manage, track and report on promotional campaigns via retail outlet EPOS systems, wireless terminals or mobile handsets. The real-time reporting and analytics enables organisations to deliver significant return-on-investment through better targeting and propensity modelling. Since 2002, 2ergos technology has delivered over 27 million vouchers worldwide. It is the system behind the hugely successful Orange Wednesdays campaign, widely regarded as the longest running and one of the most successful mobile marketing campaigns to date. Mobile coupons Since their conception in the late 1880s by Coca Cola, discount coupons and vouchers have been a firm favourite with consumers and businesses alike. Mobile couponing allows organisations to distribute digital coupons to customers mobile phones. They offer significant advantages over paper-based alternatives due to the fact that they are proven to deliver higher redemption rates, offer better security and encourage impulse traffic. The real magic of mobile couponing is in the redemption of each coupon. Mobile customer relationship management databases can be enriched with lifestyle and purchase data allowing organisations to build a more detailed profile of their customers for targeting with future marketing and promotional campaigns. Mobile ticketing Mobile ticketing allows 1D and 2D barcodes to be sent directly to mobile phones. These barcodes can be read by most retail EPOS scanners or GPRS connected handheld devices. Mobile barcodes are ideal for live events, concerts or other ticketed venues such as theme parks. They offer businesses increased security, faster entry times and lower operational costs, and provide consumers with a much richer experience that is significantly more convenient. Loyalty programmes Mobile tickets and coupons can be used to replace and enhance loyalty programmes, enabling organisations to send highly targeted, time-bound communications at critical times in the customer life cycle in order to increase customer loyalty and increase lifetime value.
Over 300 million global consumers will use a mobile phone coupon in 2014, with the applications revolution triggering growth in new services.
Juniper
Mobile ticketing and couponing total gross value is forecast to reach $92 billion by 2013.
Juniper
2 for 1
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Admit One
Admit One
Case Study: Orange Wednesdays
The Challenge To differentiate its brand and improve customer retention, Orange, one of the most successful mobile network operators in the UK, wanted to create an innovative loyalty campaign. In partnership with 2ergo, Buongiorno and the UK cinema network in 2004, and supported by a national media campaign, Orange launched Orange Wednesdays, offering all Orange customers the chance to receive two-for-one cinema tickets every Wednesday. Wednesday was chosen as cinema attendance was the lowest on this day. The Solution Orange wanted to make this process easy for customers, and cinemas wanted to ensure their transaction times at the box office were unaffected. To deliver against both organisations priorities Orange chose to use 2ergos endto-end couponing and voucher solution, which enabled Orange customers to easily take up the offer and ensured cinemas could quickly validate Orange customers when they arrived at the box office. After texting FILM to 241, Orange customers receive a two-for-one unique text ticket code that can then be redeemed at the box office that Wednesday. The code is then scanned or entered into the participating outlets EPOS system or behind the till GPRS-enabled unit. The solutions inbuilt two-way security validation system then validates the Orange user and the coupon number before the two-for-one free ticket is issued. As well as allowing organisations to distribute and redeem coupons, the end-to-end capability also meant Orange could manage and track coupons issued as well as receive real-time reports on the campaign. The Results Orange Wednesdays is now not only the longest running but also one of the most successful mobile marketing campaigns in the world, having been enjoyed millions of times since the deal was launched in 2004. Through Orange Wednesdays, the number of people visiting UK cinemas every year has increased significantly, adding investment and growth to the industry as well as savings for customers. Wednesday is now the most popular day of the week to go to the cinema outside of the weekend. The five year Orange Wednesdays campaign has been so successful it has now been extended to offer two-for-one meals at Pizza Express.
The Futures Bright: Mobile coupon and redemption campaign creates brand loyalty and improves customer retention
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Mobile Security and Advanced Messaging

2ergos Mobile Security and Advanced Messaging solutions can be used by organisations to offer customers a secure, safe and convenient way to send sensitive customer data, or transfer money to third parties, via a mobile phone. They are ideal for mobile payments, mobile banking, mobile money transfer, market research and customer care environments, as well as workforce applications within both the public and private sectors. They hold particular value to the healthcare sector where the security of sensitive customer data is paramount. In the telecoms environment they can be used to drive loyalty, particularly in the high-churn world of pre-pay where they provide an ideal solution for mobile top-up. The immediacy of SMS combined with the richness of an Internet experience 2ergos Mobile Security and Advanced Messaging solutions are operated via an application that sits on the mobile handset. The application enables consumers to send secure person-to-person or person-to-machine communications quickly and easily. Instead of plain text, the messages are structured in forms with data entry fields, such as drop down lists or pre-formatted as alpha or numeric characters. Using patented technology, the messages are encrypted at both ends to ensure they cannot be intercepted, making them ideal for mobile banking, mobile money transfer, healthcare services or other sensitive situations. Easy-to-use web-based interface Through the easy-to-use web-based interface, organisations can easily design and build the handset applications, which are subsequently downloaded from the Internet or transferred to users handsets via encrypted SMS. Applications can be updated with ease and distributed to groups or individuals. The solution also includes unique timers and wake-up facilities such that an application can be remotely set to wake-up either at a predefined time or on demand by the organisation. If it was being used for market research, for example, the market research company would perform this task once a new survey had been uploaded in order to encourage the user to complete the survey.
International mobile money transfer services to exceed $65bn by 2014.

Juniper
Mobile payments and security are predicted to generate $587 billion of mCommerce transactions by 2011.
Juniper
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2ergos Advanced Messaging solutions offer a unique data capture messaging service that combines the immediacy of SMS with the richness of an Internet experience. It is an ideal solution for marketers and organisations looking to utilise the mobile channel for direct response marketing, market research or data capture.
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Business Partner Programme

The 2ergo Business Partner Programme is designed to cultivate business relationships with global and regional partner companies, and accelerate their adoption and use of 2ergos broad mobile products and services portfolio in order to drive the growth and success of their clients businesses. Unlike traditional reseller programmes that merely offer a channel-ready version of a product, the 2ergo programme is a true partnership approach, focused on leveraging 2ergos market leading expertise in the mobile arena to help facilitate cutting-edge solutions to partners clients. Within this context, 2ergo has helped to enable some of the worlds largest agencies and global mobile technology providers to bring unique and creative solutions to their customers through the use of mobile products and services. In 2010, 2ergo will be enhancing the programme even further with dedicated educational elements that will allow all of its partners to stay up-tospeed on best practice regarding 2ergo technology, and how to use it effectively in order to deliver value to their clients. In the past 12 months, 2ergo has established relationships with some of the worlds most respected marketing and advertising agencies, including Ogilvy & Mather, BBH and McCann Erickson, as well as market research leader Kantar Operations. Business intelligence organisations such as Data Lateral and GroupM are also benefitting from working with 2ergo.
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2ergo has helped the millions of citizens of Hopenhagen participate in the landmark international movement via their mobile phone.
Seth Farbman, President of OgilvyEarth, Ogilvy & Mathers Global Sustainability Practice
Case Study: Mobile Partner to Ogilvy & Mather: Hopenhagen
The Challenge To create a global community to lead our leaders into making the right decisions at the crucial 2009 UN Climate Change Conference, a high-impact, global marketing and communications initiative was created to raise awareness of and involvement in climate change issues, and send a strong message to the conference delegates responsible for ratifying a new global climate change treaty. Created by Ogilvy & Mather on behalf of the International Advertising Association the campaign demanded the time and expertise of more than 90 companies to bring the Hopenhagen initiative to life. Alongside a highly creative element, the hub for the campaign was the Hopenhagen website. Pivotal to the website and the impact of the campaign, an interactive mobile site was identified as the most effective way to mobilise the citizens of the world and allow them to learn more about the initiative, sign a petition and expand the movement with friends worldwide. The Solution Recognising the tremendous role that communications would play leading up to and during the conference, 2ergo partnered with Ogilvy & Mather and donated its industry leading mobile services and big brand, global expertise to take the campaign mobile and amplify its reach. 2ergo created the Hopenhagen mobile website at http://m.hopenhagen.org to allow users to sign the Hopenhagen petition, learn more about the climate change conference, read related news and easily spread the word through Facebook and Twitter. 2ergos mSite improved the experience for the vast number of people accessing the Internet from their mobile and ensured an engaging user experience regardless of the device used to access the site. 2ergo also included mobile detection code to automatically redirect users visiting the URL from a mobile phone to the mobile site. The Results The critical mobile channel created an engaging conduit for a movement that connected millions of people around the world to influence their world leaders. 2ergos work for Hopenhagen has pushed the cause into the pockets of the world and increased the worldwide access and availability of the petition. The optimised user experience made it possible to engage every user across the globe, irrespective of the mobile phone type they were using.
Enabling global engagement through mobile technology worldwide
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Reveal the Infinite
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Admit One
Admit One
Annual Report + Accounts 2008/2009
Directors Report
The directors present their annual report, the audited consolidated financial statements and the audited Company financial statements for the year ended 31 August 2009. Principal activities, business review and future developments The principal activities of the Group in the year under review were telecommunication software provision, application and development. A detailed review of the business, together with the outlook for the future, is contained in the Chairmans Statement on page 8 and the Management Review on pages 9 to 13. Directors BA Sharples NS Graham J Collighan K Seeley MS Caller
Directors share options The directors hold the following share options:
Options over ordinary shares of 1p each 31 August 2009 BA Sharples NS Graham J Collighan K Seeley MS Caller 132,383 132,383 364,204 31 August 2008 132,383 132,383 364,204
The market price of the Companys shares at the end of the financial year was 117.5p and the range of the market price during the year was between 113.5p and 188.5p. Substantial shareholdings At 18 November 2009, the directors have been notified of the following beneficial interests in excess of 3% of the issued share capital of the Company (excluding those shares held in treasury):
Total shares % 13.53 9.48 9.33 9.33 3.67 3.61 3.42 3.38 3.28 3.08
The Company has agreed to indemnify its directors against third party claims which may be brought against them and has put in place a directors and officers insurance policy.
Aviva plc N Wray BA Sharples NS Graham D Traynor Standard Life Investments T Bladon J Collighan D Hanson C Brassington
4,396,925 3,081,874 3,033,822 3,033,822 1,194,411 1,175,000 1,110,900 1,099,116 1,066,392 1,000,000
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Corporate governance The Board of Directors, so far as it is practicable and to the extent appropriate, having regard to the size of the Group, intends to continue to comply with the main provisions of the principles of good corporate governance. The Board holds regular meetings and is responsible for formulating, reviewing and approving the Groups strategy, budgets, major items of capital expenditure, similar personnel appointments and key performance indicators. Details of the Groups financial key performance indicators, which include revenue, gross profit, operating profit and the Groups cash balance are included in the Financial performance section of the Management Review on pages 9 and 10. The Groups non-financial key performance indicators include platform, system and application availability and latency and customer service and satisfaction levels. The Board has established a Remuneration Committee consisting of all non-executive directors, currently MS Caller and K Seeley. It reviews the performance of executive directors and sets the scale and structure of their remuneration and other terms of their service agreements with due regard to the interest of shareholders. In exercising this role, the Committees Terms of Reference require it to comply with the relevant provisions of the Code of Best Practice in the Combined Code. The Board has also established an Audit Committee which consists of all current non-executive directors. The Committee meets at least twice a year, linked to the timing of the publication of the Groups results. It assists the Board in meeting its responsibilities in respect of external financial reporting and internal controls. The Audit Committee also keeps under review the scope and results of the audit. In addition it considers the cost-effectiveness, independence and objectivity of the auditors, taking into account the non-audit services provided by them. The executive directors and external auditors normally attend meetings by invitation. Research and development Research and development expenditure incurred in the development of new products is capitalised when recoverability can be assessed with reasonable certainty and is amortised in line with the expected sales arising from the projects. All other development costs are written off in the year of expenditure. Share capital During the year, the Company purchased 1,000,000 of its own ordinary shares at a cost of 1,373,000. The purchased shares are held as treasury shares. At 31 August 2009, the number of ordinary shares held in treasury represented 3.0% of the total issued share capital of the Company. Details of other changes in the Companys share capital are set out in note 15 of the consolidated financial statements.
Risk management objectives and policies Details of the Groups financial risk management objectives and policies are set out in note 14 of the consolidated financial statements. The key non-financial risks that the Group faces are listed below: Impact of new and evolving technology The Groups forecasts make assumptions over wider market acceptance of new and evolving mobile technology. These forecasts are built up by management based on over 80 combined years experience of the mobile industry. Exposure to the risk of delays in market acceptance of the Groups technology is mitigated by the broad suite of products now offered by the Group and the range of territories in which the Group now operates, not all of which are at the same stage of market development, which presents the Group with further opportunities. Proprietary technology The Group currently derives a competitive advantage from its proprietary Multiserve platform and its integrated application suite. Patents are in place over certain of the Groups technology. If the technology used by the Group is alleged to infringe the proprietary rights of others, or if others infringe the Groups rights, the Group may be forced to seek licenses, re-engineer its services, engage in expensive and time-consuming litigation or cease particular activities. This risk is mitigated by the constant evolution of the Groups platform, the unique and well established way in which the application suites are combined which provides product differentiation from the rest of the market and the patents and non-disclosure agreements that the Group has in place. Recruitment and retention Technological competence and innovation is critical to the Groups business and depends on the expertise of the directors and key employees and the work of technically skilled employees. Whilst the Group has entered into contractual arrangements and offers competitive reward and benefit packages, including long term incentive schemes, with the aim of securing the services of these directors and employees, as is the case within all companies, the retention of their services is not guaranteed. The market for the services of these types of employees is competitive and therefore the Group may not be able to attract and retain these employees. The Groups investment in an enlarged HR department is key to the ongoing process of rewarding and developing the best people to develop its innovative technology and support its clients.
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Development of regulation Regulation of mobile services varies by country and evolves over time. In particular increased and varying global governmental regulations may inhibit the growth of the market in certain territories. The Group has mitigated this risk through the use of in-house and external regulatory specialists and by strengthening its local knowledge of government regulations through the acquisitions during the year. Economic climate The Group is subject to the general risks to which all companies operating in the same market are subject, including the general macro-economic climate. A number of the Groups products provide clients with the opportunity to optimise business processes and offer significant and fast returns on investment. Following the acquisitions made during the year, which strengthened the product portfolio of the Group and its global coverage, and considering the Groups expectations for future performance, the directors believe that the Group is well positioned to manage this risk and are confident of the future growth of the Group. The risk is mitigated by the range of territories in which the Group now operates, not all of which are at the same stage of market development and therefore impacted in the same way by global economic conditions. Related party transactions Details of the Groups transactions and year end balances with related parties are set out in note 19 of the consolidated financial statements. Dividends The directors do not recommend the payment of a dividend (2008: Nil).
Supplier payment policy It is the Groups policy to pay its suppliers in accordance with the terms and conditions agreed in advance of each transaction once satisfactory performance of service or receipt of goods has been achieved. Group creditor days at the year end were 36 days (2008: 30 days) of average supplies for the year. Off-balance sheet arrangements The Group does not have any off-balance sheet financing arrangements. Auditors Grant Thornton UK LLP have expressed willingness to continue in office. In accordance with Section 489(4) of the Companies Act 2006 a resolution to re-appoint Grant Thornton UK LLP will be proposed at the forthcoming Annual General Meeting. By order of the board J Collighan Company Secretary 4th Floor, Digital World Centre 1 Lowry Plaza The Quays Salford Manchester M50 3UB 20 November 2009
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Statement of Directors Responsibilities

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. United Kingdom company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared financial statements for the Group in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and financial statements for the Company in accordance with United Kingdom accounting standards (United Kingdom Generally Accepted Accounting Practice). The financial statements are required by law to give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the directors are required to: select suitable accounting policies and then apply them consistently make judgements and estimates that are reasonable and prudent state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business The directors are responsible for keeping adequate accounting records that disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. In so far as each of the directors is aware: there is no relevant audit information of which the Groups auditors are unaware the directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Groups website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
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Report of the Independent Auditor to the Members of 2ergo Group plc

We have audited the group financial statements of 2ergo Group plc for the year ended 31 August 2009 which comprise the consolidated income statement, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. This report is made solely to the Companys members, as a body, in accordance with Sections 495 and 496 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Companys members those matters we are required to state to them in an auditors 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 Companys members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the Statement of Directors Responsibilities, the directors are responsible for the preparation of the group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the group 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 Boards (APBs) 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 APBs website at www.frc.org.uk/apb/scope/UKNP . Opinion on financial statements In our opinion the group financial statements: give a true and fair view of the state of the Groups affairs as at 31 August 2009 and of its loss for the year then ended; have been properly prepared in accordance with IFRS as adopted by the European Union; and have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Directors report for the financial year for which the group financial statements are prepared is consistent with the group financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: certain disclosures of directors remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. Other matter We have reported separately on the parent company financial statements of 2ergo Group plc for the year ended 31 August 2009. Joanne Kearns Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Manchester 20 November 2009
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Consolidated Income Statement

for the year ended 31 August 2009
Note Revenue Cost of sales Gross profit Administrative costs Operating profit before impairment of available for sale investment Impairment of available for sale investment Operating profit Finance income Profit before taxation Taxation (Loss)/profit for the financial year Earnings per share Basic Diluted 7 7 (0.60)p (0.60)p 8.54p 8.27p 6 10 3 5 2 2009 000 22,693 (11,806) 10,887 (10,502) 3,579 (3,194) 385 234 619 (803) (184) 2008 000 32,565 (22,796) 9,769 (6,761) 3,008 3,008 438 3,446 (911) 2,535
All activities relate to continuing operations.
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Consolidated Balance Sheet

as at 31 August 2009
Note Non-current assets Intangible assets Property, plant and equipment Available for sale investments Loan to related party 8 9 10 14,19 21,273 823 22,096 Current assets Trade and other receivables Cash and cash equivalents 11 14 6,068 6,434 12,502 Total assets Current liabilities Trade and other payables Current income tax payable 12 (3,878) (267) (4,145) Non-current liabilities Other payables Deferred income tax liability 12 13 (6,736) (225) (6,961) Total liabilities Net assets Capital and reserves attributable to equity holders of the parent Share capital Share premium Investment in own shares Merger relief reserve Merger reserve Other reserve Share option reserve Retained earnings Total equity 15 15 15 15 335 7,724 (1,373) 3,375 1,512 (338) 914 11,343 23,492 306 7,724 1,512 (338) 813 6,089 16,106 (11,106) 23,492 (5,240) 16,106 (4,742) (498) (5,240) 34,598 6,817 9,120 15,937 21,346 2,937 362 1,610 500 5,409 2009 000 2008 000
These financial statements were approved by the Board on 20 November 2009 and signed on its behalf by J Collighan Director NS Graham Director
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Consolidated Statement of Changes in Equity

Share capital 000 Balance at 31 August 2007 301 Share premium account 000 7,141 Investment in own shares 000 Merger relief reserve 000 Merger reserve 000 1,512 Other reserve 000 (413) Share option reserve 000 605 Retained earnings 000 6,170 Total 000 15,316
Valuation loss on available for sale investment taken to equity Tax on items taken directly to or transferred from equity
Net loss recognised directly in equity Profit for the year Total recognised income and expense for the year Issue of share capital IFRS 2 share based payment expense Fair value of options exercised in the period Exercise of options over shares in EBT Balance at 31 August 2008 Recycling of valuation loss on available for sale investment taken to equity (note 10) Reinstatement of cost of previously impaired available for sale investment (note 18) Tax on items taken directly to or transferred from equity Net gain recognised directly in equity Loss for the year Total recognised income and expense for the year Issue of share capital Purchase of shares into treasury IFRS 2 share based payment expense Balance at 31 August 2009
5 306
583 7,724
1,512
75 (338)
267 (59) 813
(2,995) 320 (2,675) 2,535 (140) 59 6,089
(2,995) 320 (2,675) 2,535 (140) 588 267 75 16,106
2,394
2,394
29 335
7,724
(1,373) (1,373)
3,375 3,375
1,512
(338)
101 914
3,194 (150) 5,438 (184) 5,254 11,343
3,194 (150) 5,438 (184) 5,254 3,404 (1,373) 101 23,492
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Consolidated Cash Flow Statement

2009 000 Cash flows from operating activities Profit before taxation Adjustments for: Impairment of available for sale investment Depreciation Amortisation Share based payment expense Finance income Decrease/(increase) in trade and other receivables Decrease in trade and other payables Income tax paid Net cash flows from operating activities Cash flows from investing activities Payments to acquire property, plant and equipment Payments to acquire intangible assets Loan granted to related party Purchase of subsidiary undertakings Cash acquired with subsidiaries Interest received Net cash flows from investing activities Cash flows from financing activities Net proceeds from share issue Purchase of shares into treasury Proceeds from exercise of options over shares held in EBT Net cash flows from financing activities Net decrease in cash and cash equivalents in the year Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year (1,373) (1,373) (2,686) 9,120 6,434 101 75 176 (131) 9,251 9,120 (614) (2,411) (1,133) (1,024) 96 234 (4,852) (255) (1,162) (500) 438 (1,479) 3,194 250 1,139 101 (234) 959 (1,711) (778) 3,539 148 948 267 (438) (949) (2,006) (244) 1,172 619 3,446 2008 000
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Notes to the Consolidated Financial Statements

1 Accounting policies
Basis of preparation The consolidated financial statements have been prepared in accordance with applicable International Financial Reporting Standards as issued by the International Accounting Standards Board and adopted by the EU (IFRS). These financial statements have been prepared on a going concern basis under the historical cost convention. The directors have prepared a forecast which identifies that the Group continues to comfortably have sufficient working capital to continue trading for the foreseeable future and therefore the directors feel it is appropriate to continue to prepare the financial statements on a going concern basis. These financial statements have been prepared using the measurement bases specified by IFRS for each type of asset, liability or expense. The detailed measurement bases and principal accounting policies of the Group are set out below. The accounting policies have been applied consistently throughout the Group for the purposes of the preparation of these consolidated financial statements. The presentational currency of the Group and functional currency of the Company is Sterling. Basis of consolidation The consolidated financial statements consolidate those of the Company and its subsidiary undertakings drawn up to 31 August each year. Subsidiaries are entities over which the Company has the power to control the financial and operating policies so as to obtain benefits from their activities. The Group generally obtains and exercises control through voting rights. The results of subsidiaries acquired are consolidated from the date on which control passed. Acquisitions of subsidiaries are accounted for under the purchase method, other than for the original acquisition of 2ergo Limited by 2ergo Group plc which has been accounted for using the principles of merger accounting as permitted by IFRS 1. Joint ventures are entities in which the Group holds an interest on a long-term basis and which are jointly controlled with one or more parties under a contractual arrangement. The Groups share of joint venture income, expenses, assets, liabilities and cashflows is included in the consolidated financial statements on a proportionate consolidation basis. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Business combinations Under the provisions of IFRS 1, the Group has elected not to apply IFRS 3 Business Combinations retrospectively to business combinations prior to the date of transition to IFRS. Accordingly, the classification of acquisitions prior to the date of transition remain unchanged from those used under UK GAAP Assets and liabilities are recognised at the date of transition (if they would be recognised under IFRS), and are . recognised at net book value. Subsequent to the date of transition, the purchase method is used for the acquisition of subsidiaries. This involves the recognition at fair value of the assets, liabilities and contingent liabilities of the subsidiary at the acquisition date. These fair values are also used as the bases for subsequent measurement in accordance with the Group accounting policies. In accordance with IFRS 3, the fair value of assets or liabilities acquired, where cash flows arise in future periods, is obtained by discounting to present value the amounts expected to be receivable or payable in the future using a weighted average cost of capital.
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Revenue Revenue represents the fair value of consideration receivable by the Group for services provided, net of value added tax. The Groups revenue streams include monthly service fees, application development fees, licence fees and transaction fees depending on the type and delivery of service. Revenue for transaction fees is recognised at the point of service delivery and when collection of the resulting receivable is reasonably assured. Monthly service and licence fees are recognised over the period of the agreement. Development fees are recognised in line with achievement of contracted milestones. When components of a single invoice are separately identifiable, such as development and monthly service fees, revenue is measured separately for each component in accordance with the recognition policies above. Intangible assets Purchased intellectual property Purchased intellectual property is capitalised at cost and amortised on a straight line basis based upon the directors estimate of their useful economic lives (1 to 10 years). Research and development Expenditure on research is written off in the period in which it is incurred, except where such expenditure is recoverable from third parties. Development costs incurred are capitalised when all the following conditions are satisfied: completion of the product is technically feasible so that it will be available for use or sale the Group intends to complete the product and use or sell it the Group has the ability to use or sell the product the product is commercially viable and will generate probable future economic benefits there are adequate technical, financial and other resources to complete development of the product, and the expenditure attributable to the product during its development can be measured reliably Development costs comprise all directly attributable costs, including employee costs incurred on software development along with an appropriate portion of relevant overheads. Development costs not meeting the criteria for capitalisation are written off as incurred. Development costs are capitalised at cost and amortised on a straight line basis based upon the directors estimate of their useful economic lives (3 to 10 years). Development costs that have been capitalised are amortised from completion and commercial sale of the product. Assets acquired as part of a business combination In accordance with IFRS 3 Business Combinations, an intangible asset acquired in a business combination is deemed to have a cost to the Group of its fair value at the acquisition date. The fair value of the intangible asset reflects expectations about the probability that future economic benefits from the asset will flow to the Group. These costs are amortised on a straight line basis based upon the directors estimate of their useful economic lives as above. Goodwill Goodwill arising on business combinations represents the difference between the cost of a business acquisition and the fair value of the net identifiable assets acquired. The cost of acquisition represents the fair value of assets given and equity instruments issued in return for the assets acquired, plus directly attributable costs. Property, plant and equipment Property, plant and equipment are stated at cost less depreciation and any provision for impairment. Depreciation is provided to write down the cost over the assets estimated useful economic lives as follows: Computer equipment Office furniture and fittings 25% or 33.3% straight-line 25% or 33.3% straight-line
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Impairment testing of intangible assets and property, plant and equipment For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Those intangible assets not yet available for use and goodwill are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset or cash-generating units carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value less costs to sell, and value in use based on an internal discounted cash flow valuation. Any impairment loss is charged pro rata to the assets in the cash-generating unit. Leased assets Rentals paid under operating leases are charged to the income statement on a straight line basis over the period of the lease. Taxation Current tax is the tax currently payable based upon the taxable profit for the period. Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Tax losses which are available to be carried forward and other income tax credits to the Group are assessed for recognition as deferred tax assets. Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are measured at tax rates that are expected to apply in the period of realisation based on tax rates and laws that have been enacted or substantively enacted at the balance sheet date. Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity. Financial assets Financial assets are recognised when the Group becomes a party to the contractual provisions of the contract. They are assigned to the categories described below by management on initial recognition, depending on the purpose for which they were acquired. The designations of financial assets are re-evaluated at every reporting date at which a choice of classification or accounting treatment is available, and are as follows: Available for sale investments Available for sale investments include non-derivative financial assets that are either designated as such or do not qualify for inclusion in any of the other categories of financial assets. These investments are measured subsequently at fair value, with changes in value recognised in equity, through the statement of changes in equity. The fair values of quoted investments are based on market prices at the balance sheet date. Gains and losses arising from investments classified as available for sale are recognised in the income statement when they are sold or when the investment is impaired. Prior to the acquisition of Broca plc on 8 April 2009, the Groups investment in the ordinary shares of Broca plc fell into this category. Loans and receivables Loans and receivables are non-derivative financial assets with fixed payments that are not quoted in an active market. These are initially recognised at fair value and subsequently are measured at amortised cost using the effective interest rate method, less provision for estimated irrecoverable amounts. Any change in their value through impairment or reversal of impairment is recognised in the income statement. The carrying value less impairment provision of loans and receivables is assumed to approximate to their fair value. The Groups trade receivables, the loan to Broca in 2008 and cash and cash equivalents fall into this category.
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Cash and cash equivalents Cash and cash equivalents comprise cash in hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. Financial liabilities Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the contract. The Groups financial liabilities include trade payables and contingent consideration on acquisitions which are measured initially at fair value and subsequently at amortised cost using the effective interest rate method, based on managements expectations of performance. Derecognition of financial assets and liabilities A financial asset or liability is generally derecognised only when the contract that gives rise to it is settled, sold, cancelled or expires. Foreign currencies Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are reported at the rates of exchange prevailing at that date. Exchange differences arising on the settlement and retranslation of monetary items are included in the operating result for the year. The results of overseas operations are translated at the monthly average rates of exchange during the period and their assets and liabilities at the rates of exchange ruling at the balance sheet date. Exchange differences arising on translation of the opening net assets and results of overseas operations are taken directly to equity. Employee benefits The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The pension costs charged against profits are the contributions payable to the scheme in respect of the accounting period. Share-based payments The Group issues equity-settled share-based payments to certain employees. The fair value of these payments is determined at the date of grant and is expensed on a straight line basis over the vesting period based on the Groups estimate of shares or options that will eventually vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting. In the case of options granted, fair value is measured by the Black-Scholes pricing method. All equity-settled share-based payments are ultimately recognised as an expense in the income statement with a corresponding credit to the share option reserve. Upon exercise of share options the proceeds received, net of attributable transaction costs, are credited to share capital, and where appropriate share premium. Employee benefit trust The assets and liabilities of the Employee Benefit Trust (EBT) have been included in the consolidated financial statements. Any assets held by the EBT cease to be recognised on the consolidated balance sheet when the assets vest unconditionally in identified beneficiaries. The costs of purchasing own shares held by the EBT are shown as a deduction against equity. The proceeds from the sale of own shares increase equity. Neither the purchase nor sale of own shares leads to a gain or loss being recognised in the consolidated income statement.
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Equity Equity comprises the following: Share capital, representing the nominal value of shares of the Company; Share premium, representing the excess over the nominal value of the fair value of consideration received for shares, net of expenses of the share issue; Investment in own shares, representing the cost of purchasing issued shares in the Company into treasury; Merger relief reserve, representing the excess over the nominal value of shares issued of the fair value of net assets acquired and goodwill arising on acquisition; Merger reserve, representing the excess of the Companys cost of investment over the nominal value of 2ergo Limiteds shares acquired where the Group reorganisation qualified as a common control transaction; Other reserve representing the cost of the Companys shares held by the EBT that are shown as a deduction against equity; and Share option reserve, representing the cost of equity-settled share-based payments until such share options are exercised.
Recently issued accounting pronouncements At the date of issue of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective. The directors anticipate that the adoption of these Standards and Interpretations will not have a material impact on the Groups financial statements other than for changes to presentation of the financial statements when IAS 1 comes into effect and that further operating segments will be reported in future when IFRS 8 comes into effect. The directors anticipate that the Group will adopt these Standards and Interpretations on their effective dates. IAS 1 Presentation of Financial Statements (Revised 2007) IFRS 3 Business Combinations (Revised 2008) IFRS 8 Operating Segments IFRS 9 Financial Instruments Amendment to IFRS 2 Share-based Payment Vesting Conditions and Cancellations Amendment to IFRS 7 Financial Instruments: Disclosures Improving Disclosures About Financial Instruments Improvements and amendments to IFRSs Of the Standards and Interpretations listed above IFRS 9 is yet to be endorsed by the European Union.
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Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported revenue and expenses during the periods presented. Actual results may differ significantly from the estimates, the effect of which is recognised in the period in which the facts that give rise to the revision become known. The following paragraphs detail the policies the Group believes to have the most significant impact on the annual results under IFRS. Share-based payments The Group issues equity-settled share-based payment options to certain employees. The fair value of these options granted is determined using the Black-Scholes valuation model, which requires a number of estimates and assumptions. The significant inputs into the model are share price at grant date, exercise price, expected option life, expected volatility and the risk-free rate. Volatility is measured as the standard deviation of expected share price returns based on a statistical analysis of share prices of companies in the peer group. Provision for doubtful trade receivables The Group evaluates the collectability of trade receivables and records provisions based on experience. These provisions are based on, amongst other things, comparison of the relative age of accounts and consideration of actual write-off history. The actual level of receivables collected may differ from the estimated levels of recovery, which could impact operating results positively or negatively. Intangible assets Intangible assets are capitalised at cost and amortised on a straight line basis based upon the directors estimate of their useful economic lives. The level of success of products and applications based on these intangible assets may be different from the directors estimates, which could impact the useful economic lives of the intangible assets and operating results positively or negatively. Impairment of goodwill The Group determines whether goodwill arising on acquisitions is impaired on at least an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating a value in use amount requires the directors to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The actual cash flows may be different from the directors estimates, which could impact the carrying value of the goodwill and therefore operating results negatively. Contingent consideration The consideration payable for the acquisition of certain subsidiaries includes a deferred element which is contingent on the future performance of the acquired business. The value of contingent consideration recognised is based on the directors estimates of that future performance and has been discounted. The actual performance may be different from the directors estimates, which could impact the value of contingent consideration recognised and the interest charge relating to the unwinding of the discount.
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2 Segmental analysis
All revenue was derived from the Groups principal activity which relates to the provision of services. In the opinion of the directors the activities of the Group fall into one class of business segment, which they consider to be the primary segment. The Groups secondary segments are geographical segments. In the years ended 31 August 2009 and 2008, the Groups revenue is generated mainly in the UK and the Americas. Of the Groups consolidated revenue and assets, greater than 75% is derived from customers located in the UK, for each of the years ended 31 August 2009 and 2008 and hence no geographical analysis is presented.
3 Operating profit
2009 000 Operating profit is stated after charging to administrative costs: Impairment of available for sale investment Depreciation of owned tangible assets Amortisation of intangible assets Operating lease rentals Auditors remuneration Audit of parent company and consolidated accounts Audit of the Companys subsidiaries Other non-audit services Research and development 11 11 85 145 10 11 8 141 3,194 250 1,139 328 148 948 57 2008 000
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4 Particulars of staff
The average number of persons employed by the Group, including executive directors, during the year was:
2009 No Technical Sales and administration 36 58 94 2008 No 33 49 82
The aggregate payroll costs of these persons was:

2009 000 Wages and salaries Share scheme costs Social security costs Pension costs defined contribution plan Less: amounts capitalised 4,345 101 498 114 (1,361) 3,697 2008 000 4,085 267 467 103 (739) 4,183
Key management remuneration Remuneration of the key management team, including executive directors, during the year was as follows:
2009 000 Aggregate emoluments including short-term employee benefits Share scheme costs Pension costs defined contribution plan 1,061 146 61 1,268 2008 000 1,154 241 57 1,452
Directors remuneration Remuneration of directors during the year was as follows:

2009 000 Aggregate emoluments including short-term employee benefits Pension costs defined contribution plan Fees 337 46 35 418 2008 000 526 45 27 598
The remuneration of the highest paid director during the year was:
2009 000 Aggregate emoluments including short-term employee benefits Pension costs defined contribution plan 108 21 129 2008 000 169 21 190
Retirement benefits are accruing to 3 (2008: 3) directors in respect of defined contribution schemes. 50
5 Finance income
2009 000 Interest income on loan to related party Interest income on short-term bank deposits 30 204 234 2008 000 5 433 438
6 Income tax expense

2009 000 Current tax UK Corporation tax at 28.00% (2008: 29.16%) Adjustments in respect of prior years 693 693 Deferred tax Tax on profit on ordinary activities Tax reconciliation Profit before tax Tax using the UK corporation tax rate of 28.00% (2008: 29.16%) Non-deductible expenses Losses carried forward Research and development tax credits Exercise of options and employee share acquisition relief Share-based payment temporary differences Adjustment to current tax in respect of prior years Impairment of available for sale investment Other Tax on profit on ordinary activities 619 173 30 (89) (192) (28) 894 15 803 3,446 1,005 83 102 (95) (151) (19) (14) 911 110 803 839 (14) 825 86 911 2008 000
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7 Earnings per share

The calculation of basic earnings per share is based on profit attributable to ordinary shareholders divided by the weighted average number of ordinary shares in issue during the year. The calculation of diluted earnings per share is based on the basic earnings per share adjusted to allow for the assumed conversion of all dilutive options. In 2009, the weighted average number of shares for the purpose of calculating diluted earnings per share is the same as for the basic earnings per share calculation. This is because the outstanding share options would have the effect of reducing the loss per ordinary share and therefore would be anti-dilutive. In 2008, 644,149 options were not included in the calculation as they would have been anti-dilutive due to their exercise price being greater than the market price of an ordinary share.
2009 Weighted average number of ordinary shares 30,485,339 (0.60) (184) 30,485,339 8.27 2,535 2008 Weighted average number of ordinary shares 29,669,451 980,077 30,649,528
Earnings per share pence Basic earnings per share Dilutive effect of share options Diluted earnings per share (0.60)
Loss 000 (184)
Earnings per share pence 8.54
Earnings 000 2,535
An adjusted earnings per share, before the impairment of the investment in Broca plc, has been presented in addition to the earnings per share as defined in IAS 33, since in the opinion of the directors, this provides a more meaningful indicator for investors. The weighted average number of shares for adjusted basic earnings per share and adjusted diluted earnings per share is the same as for basic earnings per share and diluted earnings per share respectively. Adjusted earnings per share can be reconciled from the basic earnings per share as follows:
2009 Weighted average number of ordinary shares 30,485,339 30,485,339 9.87 3,010 30,485,339 8.27 2,535 8.54 2008 Weighted average number of ordinary shares 29,669,451 29,669,451 980,077 30,649,528
Earnings per share pence Basic earnings per share Impairment charge Adjusted basic earnings per share Dilutive effect of share options Adjusted diluted earnings per share 9.87 (0.60)
Earnings 000 (184) 3,194 3,010
Earnings per share pence 8.54
Earnings 000 2,535 2,535
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8 Intangible assets
Intellectual property for mobile/Internet applications 000
Goodwill 000 Cost At 1 September 2007 Additions internally developed Additions purchased At 31 August 2008 Additions internally developed Additions purchased Acquisitions At 31 August 2009 Amortisation At 1 September 2007 Charge for the year At 31 August 2008 Charge for the year At 31 August 2009 Net book value At 31 August 2009 At 31 August 2008 At 1 September 2007 14,087 -
Total 000
14,087 14,087
4,381 724 438 5,543 1,361 1,050 2,977 10,931
4,381 724 438 5,543 1,361 1,050 17,064 25,018
1,658 948 2,606 1,139 3,745
1,658 948 2,606 1,139 3,745
7,186 2,937 2,723
21,273 2,937 2,723
During the year the Group made 3 acquisitions, purchasing Broca plc (Broca), Wapfly Technologies Pty Limited (Australia) and Activemedia Technologies Limited (AMT). Annual impairment reviews of goodwill arising on acquisitions have been performed for the cash generating units related to each of the Broca, Australia and AMT acquisitions. The recoverable value of each unit has been based on its value in use. The cash flow projections, which were based on forecasts approved by the directors, supported the carrying value of goodwill with no impairment required. An analysis of each cash generating units goodwill is provided in note 18. The Group has no intangible assets with indefinite useful lives other than goodwill.
Period over which cashflows have been projected 10 years 5 years 10 years Growth rate beyond management approved forecasts 02.25% 2.25% 02.25%
Cash generating unit Broca Australia AMT
Carrying value of goodwill 000 6,786 205 7,096
Discount rate for cashflow projections 8% 8% 8%
The key assumptions underlying these forecasts are the growth rates for use of the products of each cash generating unit and the growth rate of mobile technology generally in the relevant territories. These assumptions are based on managements experience. Cashflows for the Broca and AMT cash generating units have been projected over more than 5 years due to the technology rich nature of these cash generating units products, which not only have demand in the Groups existing territories, but have particularly strong potential in emerging markets such as Asia, Africa and South America, and due to the acquisitions being either pre-revenue or in the early stages of revenue generation. The directors do not believe there is any reasonably possible change to any key assumption used in determining the recoverable amount which would cause any of the cash generating units carrying amounts to exceed their respective recoverable amounts.
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9 Property, plant and equipment

Computer equipment 000 Cost At 1 September 2007 Additions At 31 August 2008 Additions Acquisitions At 31 August 2009 Depreciation At 1 September 2007 Charge for the year At 31 August 2008 Charge for the year At 31 August 2009 Net book value At 31 August 2009 At 31 August 2008 At 1 September 2007 258 257 142 565 105 113 823 362 255 375 124 499 149 648 50 24 74 101 175 425 148 573 250 823 517 239 756 101 49 906 163 16 179 513 48 740 680 255 935 614 97 1,646 Office furniture and fittings 000 Total 000
10 Available for sale investments

000 Cost At 1 September 2007 Revaluation At 31 August 2008 Impairment Recycling of valuation loss taken to equity Reclassification to subsidiary on acquisition of majority interest (see note 18) At 31 August 2009 4,605 (2,995) 1,610 (3,194) 2,394 (810)
The available for sale investment was in the ordinary shares of Broca plc, which was a UK listed equity security denominated in Sterling. This investment was revalued based on the market price of its shares at 31 August 2008 and 28 February 2009. There was no disposal or impairment provision on available for sale investments in the year to 31 August 2008. The impairment charge arose in the first half of the financial year, when 2ergo held a 19.2% interest in Broca plc. In accordance with the principles of IAS 39, the carrying value of the asset was required to be written down to the quoted share price of Broca plc, giving rise to the impairment charge of 3,194,000 through the income statement for the 6 months to 28 February 2009. Subsequent to the half year, the Group completed the acquisition of the remaining share capital of Broca plc. The goodwill arising on the acquisition of the entire 100% interest in Broca plc is 6,786,000 (including 3,228,000 in relation to the initial 19.2% holding). This is supported by its value in use and is not considered to be impaired. In terms of overall net asset values, the impairment charge arising in the first half of the year has been reversed in the second half, but IAS 39 requires that the reversal of the original charge is not through the income statement. The overall impact is that while the income statement includes an impairment of 3,194,000 in respect of the previously held available for sale investment, the subsequent acquisition accounting is such that the impairment is reversed within the balance sheet and reinstated within goodwill. 54
11 Trade and other receivables

2009 000 Trade receivables Less: Provision for impairment of trade receivables 3,461 (115) 3,346 Prepayments and accrued income Other receivables 2,334 388 6,068 2008 000 4,829 (112) 4,717 1,932 168 6,817
The ageing of trade receivables at the balance sheet date was:

2009 000 Not past due Up to 3 months past due More than 3 months past due 2,423 671 367 3,461 2008 000 3,425 1,107 297 4,829
The Group trades only with recognised, credit-worthy third parties. Receivable balances are monitored on an ongoing basis with the aim of minimising the Groups exposure to bad debts and in some cases the Group holds cash as security for some customers debts. The Group has reviewed in detail all items comprising the above overdue but not impaired trade receivables to ensure that no impairment exists. As of 31 August 2009, trade receivables of 115,000 (2008: 112,000) were impaired and provided for, all of which were more than 3 months old (2008: more than 3 months old). The amount of the provision was 115,000 as at 31 August 2009 (2008: 112,000). Movements on the provision for impairment of trade receivables are as follows:
2009 000 At 1 September Provision for receivables impairment Receivables written off during the year At 31 August 112 45 (42) 115 2008 000 102 55 (45) 112
The other classes within trade and other receivables do not contain impaired assets. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable disclosed above. The carrying amounts of the Groups trade and other receivables are denominated in the following currencies:
2009 000 Sterling US Dollars Australian Dollars 5,131 736 201 6,068 2008 000 6,428 389 6,817
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12 Trade and other payables

2009 000 Current Trade payables Other payables Deferred and contingent consideration Accruals and deferred income 1,768 275 263 1,572 3,878 Non-current Deferred and contingent consideration 6,736 10,614 4,742 1,991 589 2,162 4,742 2008 000
Deferred and contingent consideration comprises deferred consideration payable in cash relating to the acquisition of Wapfly Technologies Pty Limited and deferred contingent consideration based on the directors current estimate of consideration payable in relation to the acquisition of Activemedia Technologies Limited, which can be settled in either shares or loan notes, to be determined at the Groups discretion (see note 18).
13 Deferred income tax

The elements of deferred taxation are as follows:
2009 000 Accelerated capital allowances Intellectual Property (research and development costs) Intellectual Property (acquisitions) Share option charge Trade losses acquired 6 357 582 (103) (617) 225 2008 000 6 219 (225) -
Movement in deferred tax:

Revaluation of available Share option for sale charge investment 000 000 (54) (19) (152) (225) (28) 150 (103) 168 (168) Short-term and other timing differences 000 (6) 6 -
Accelerated capital allowances 000 At 1 September 2007 Charged/(Credited) to income statement Credited to equity At 31 August 2008 Charged/(Credited) to income statement Acquisitions Charged to equity At 31 August 2009 12 (6) 6 6
Intellectual property 000 114 105 219 138 582 939
Trade losses 000 (617) (617)
000
234 86 (320) 110 (35)
Total
150
225
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14 Financial instruments and financial risk management

The accounting policies for financial instruments have been applied to the line items below:
2009 Available for sale investment 000 Assets as per the balance sheet Available for sale investment Loan to related party Trade receivables Accrued income Other receivables Cash and cash equivalents 2009 Loans and receivables 000 2008 Available for sale investment 000 2008 Loans and receivables 000
3,346 2,191 388 6,434 12,359
1,610
500 4,717 1,812 168 9,120 16,317
1,610
The loan to related party of 500,000 in 2008 was due from Broca Communications Limited in Sterling (see note 19).
2009 000 Liabilities as per the balance sheet Trade payables Other payables Accruals Deferred and contingent consideration Amortised cost 1,768 275 1,559 6,999 10,601 1,991 589 2,162 4,742 2008 000
The Group uses financial instruments to manage financial and commercial risk wherever it is appropriate to do so. Risk management is overseen by the directors, who do not consider there to be any significant risks arising from the Groups investment policies. Market risk Foreign exchange risk The vast majority of the Groups revenues and costs are in Sterling (the parent companys functional currency) and involve no currency risk. Activities in currencies other than Sterling (primarily US Dollars) are funded as much as possible through operating cash flows, mitigating foreign exchange risk on these investments. At the end of the year the Group has no material currency exposure. The Group has the following cash deposits:
2009 000 Sterling US Dollars Australian Dollars 6,256 107 71 6,434 2008 000 9,036 84 9,120
Interest rate risk profile Sterling cash deposits are placed on deposit at the most favourable floating bank deposit interest rates, taking into account the Groups short and medium term cash flow expectations. The Groups income and operating cash flows are substantially independent of changes in market interest rates.
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Credit risk The Group has no significant concentrations of credit risk. The Groups standard policies require appropriate credit checks on potential customers before sales commence. Surplus funds held in the Group are invested, in line with board-approved policy, in high quality, short-term liquid investments, usually money market funds or bank deposits. Credit risk is managed by placing cash deposits with banks which carry a minimum credit rating of AA-. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. Liquidity risk Prudent liquidity risk management requires the Group to maintain sufficient cash and short-term liquid investments to be able to settle its short-term payables as they fall due. The Group monitors rolling forecasts of its cash and short-term investments on the basis of expected cash flow.
15 Share capital
The authorised share capital of the Company is 500,000,000 (2008: 500,000,000) ordinary shares of 1p each. The share capital allotted, called up and fully paid at 31 August 2009 was 33,506,694 (2008: 30,633,838) ordinary shares of 1p each, of which 1,000,000 (2008: nil) were held in treasury.
Merger relief reserve 000 3,375 3,375
Number of shares At 1 September 2007 Issue of share capital At 31 August 2008 Issue of share capital At 31 August 2009 30,142,154 491,684 30,633,838 2,872,856 33,506,694
Share capital 000 301 5 306 29 335
Share premium 000 7,141 583 7,724 7,724
2009 movement On 8 April 2009, the Company issued 2,872,856 1p ordinary shares pursuant to the acquisition of the entire issued share capital of Broca plc. 2008 movement On 28 February 2008, the Company issued 224,505 1p ordinary shares pursuant to the exercise of share options in the Company for a cash consideration of 100,839. On 29 November 2007 the Company issued 267,179 1p ordinary shares pursuant to the acquisition agreement with VICS Limited. The share issue was in consideration for intellectual property purchased from VICS Limited. During the year to 31 August 2009, the Company purchased the following shares into treasury.
Total consideration 000 1,096 277 1,373
Date purchased 28 November 2008 29 July 2009
Number purchased 750,000 250,000 1,000,000
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16 Share option scheme

The Company has a share option scheme for all employees of the Group. Options are exercisable at a price equal to the average quoted market price of the Companys shares on the date of grant. Options are forfeited if the employee leaves the Group before the options vest. The performance criteria relating to the options are the continuing employment of the holder and the achievement of certain earnings based performance criteria.
2009 Number of share options Outstanding at the beginning of the year Granted during the year Exercised in the year Forfeited in the year Lapsed in the year Outstanding at the end of the year Exercisable at the end of the year 2,152,985 1,007,172 (148,344) (336,418) 2,675,395 1,758,639 2009 Weighted average exercise price 1.19 1.27 1.83 1.50 1.14 1.02 2008 Number of share options 2,354,132 650,475 (381,070) (159,299) (311,253) 2,152,985 1,421,074 2008 Weighted average exercise price 1.01 1.92 0.46 1.84 1.92 1.19 0.81
In the year ended 31 August 2009, options were granted on 24 November 2008, 2 March 2009, 28 May 2009 and 12 August 2009. The aggregate of the estimated fair values of the options granted on those dates was 423,659. In the year ended 31 August 2008, options were granted on 12 September 2007 and 28 July 2008. The aggregate of the estimated fair values of the options granted on those dates was 411,633. Options outstanding under the Companys share option schemes at 31 August 2009 were as follows:
2009 No of options 638,600 155,450 165,050 395,158 557,548 49,025 30,000 84,033 550,000 50,531 2008 No of options 638,600 155,450 165,050 409,735 566,450 77,700 140,000 Calendar year of grant 2003 2004 2004 2005 2006 2007 2008 2009 2009 2009 Exercise period 2006-2013 2006-2014 2006-2014 2007-2015 2008-2016 2008-2017 2010-2018 2010-2019 2010-2019 2011-2019 Exercise price per share 0.22 0.48 0.48 1.72 2.03 $3.93 1.87 1.19 1.18 1.18
Name of scheme 2003 Executive share option scheme 2004 EBT scheme 2004 Executive share option scheme 2005 Incentive share option scheme 2006 Incentive share option scheme 2007 Incentive share option scheme 2008 Incentive share option scheme 2009 Incentive share option schemes
The weighted average remaining contractual life of these options is 6.6 years (2008: 6.8 years). The fair value of the employees services received in exchange for the grant of share options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the share options granted. Fair value is determined by reference to the Black-Scholes option pricing model. The inputs into the Black-Scholes option pricing model are as follows:
2009 Weighted average exercise price Expected volatility Expected life Risk free interest rate Expected dividends 1.53 35.80%61.28% 2.36.0 years 1.27%5.03% Nil 2008 1.63 35.80%65.67% 2.25.6 years 4.10%5.03% Nil
59
The volatility of the Companys share price on each date of grant was calculated as the average of volatilities of share prices of companies in the peer group on the corresponding dates. The volatility of share price of each company in the peer group was calculated as the average of annualised standard deviations of daily continuously compounded returns on the companys stock, calculated over 2, 3, 4, 5 and 6 years back from the date of grant, where applicable. The Company recognised total expenses of 101,000 (2008: 266,885) related to equity-settled share-based payment transactions in the year.
17 Operating lease commitments

At 31 August 2009, the Group had aggregate minimum lease payments under non-cancellable operating leases for office and server sites as follows:
2009 000 Due within 1 year Due from one to five years 249 671 920 2008 000 11 11
The majority of the Groups lease agreements are for initial terms of between 1 and 2 years, with the lease agreements then becoming cancellable with 1 to 2 months notice period, other than for the Groups Head Office which can be cancelled after 5 years of the initial 10 year term.
60
18 Business Combinations
Broca acquisition Until 7 April 2009 the Group held 19.2% of the ordinary share capital of Broca plc. The impairment charge in the income statement of 3,194,000 arose in the first half of the financial year. In accordance with IAS 39, the carrying value of the available for sale investment was required to be written down to the quoted share price of Broca plc, which gave rise to the impairment charge. On 8 April 2009, the Group acquired the balance of the entire issued share capital of Broca plc and its subsidiary undertakings, Broca Communications Limited and Sure on Sight Limited for consideration of the issue of 2,872,856 ordinary shares in 2ergo Group plc. The fair value of the shares issued was determined with reference to market price on the date of acquisition. The goodwill arising on the acquisition of the entire 100% interest in Broca plc is 6,786,000 (including 3,228,000 in relation to the 19.2% holding). This is supported by its value in use and is not considered impaired. The provisional impact of the acquisition on the Groups assets and liabilities is set out below. The fair value of the assets and liabilities acquired may be adjusted for circumstances that are revealed within 12 months of the date of acquisition.
Provisional fair value 000 2,631 41 131 204 12 (2,070) 949 6,786 7,735
Book value 000 Intangible assets Property, plant and equipment Deferred tax asset Trade and other receivables Cash and cash equivalents Trade and other payables Net assets acquired Goodwill Total purchase consideration made up as follows: reclassification from available for sale investment reinstatement of cost of previously impaired available for sale investment satisfied by issue of ordinary shares direct costs relating to the acquisition 2,671 41 58 12 (2,006) 776
Adjustments 000 (40) 131 146 (64) 173
810 3,194 3,404 327 7,735
Goodwill arising on acquisition relates, inter alia, to the future potential to provide secure mobile payment, money transfer and banking solutions globally. During the period from acquisition to 31 August 2009, the Broca business generated revenue of nil and incurred a loss of 58,000. Net assets at 31 August 2009 are 124,000. Had the Broca business been part of the Group for the entire year to 31 August 2009, revenue would have increased by 12,000 and the operating profit would have decreased by 471,000. Wapfly acquisition On 14 May 2009, the Group acquired the entire issued share capital of Wapfly Technologies Pty Limited (now renamed 2ergo Australia Pty Limited) for consideration of 172,000. The provisional impact of the acquisition on the Groups assets and liabilities is set out below. The fair value of the assets and liabilities acquired may be adjusted for circumstances that are revealed within 12 months of the date of acquisition.
61
Book value 000 Intangible assets Property, plant and equipment Cash and cash equivalents Trade and other payables Net liabilities acquired Goodwill Total purchase consideration made up as follows: cash deferred consideration direct costs relating to the acquisition 7 19 (56) (30)
Adjustments 000 31 (9) 22
Provisional fair value 000 31 7 19 (65) (8) 205 197
63 109 25 197
The adjustment creating the separately identifiable intangible asset recognised on acquisition relates to customer contracts. Goodwill relates to the value added to the 2ergo product portfolio through Wapfly Technologies Pty Limiteds products and the platform provided for further growth of the Group in the Asia-Pacific region. During the period from acquisition to 31 August 2009, the 2ergo Australia business generated revenue of 265,000 and made a profit of 69,000. Net assets at 31 August 2009 are 195,000. Had 2ergo Australia been part of the Group for the entire year to 31 August 2009, revenue would have increased by 73,000 and the operating profit would have increased by 104,000. Activemedia Technologies acquisition On 24 July 2009, the Group acquired the entire issued share capital of Activemedia Technologies Limited (AMT UK) and its Indian subsidiary undertaking Active Media Technologies Private Limited for initial cash consideration of 179,000 with further estimated consideration payable of 6,890,000. The provisional impact of the acquisition on the Groups assets and liabilities is set out below. The fair value of the assets and liabilities acquired may be adjusted for circumstances that are revealed within 12 months of the date of acquisition.
Provisional fair value 000 315 49 177 65 (119) 487 7,096 7,583
Book value 000 Intangible assets Property, plant and equipment Trade and other receivables Cash and cash equivalents Trade and other payables Net assets acquired Goodwill Total purchase consideration made up as follows: cash deferred contingent consideration* direct costs relating to the acquisition 49 177 65 (31) 260
Adjustments 000 315 (88) 227
179 6,890 514 7,583
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*The deferred contingent consideration, which is payable in tranches, is discounted and calculated as 4 times Indian profit after tax and 2.8 times AMT UK operating profit for the year to 31 August 2012 based on management projections and is dependent on the acquired business achieving agreed levels of financial performance and is subject to an overall cap related to Group performance. Consideration is payable between November 2009 and November 2013 and will be settled, at the discretion of the Group, by the issue of new ordinary shares in the Company or loan notes. The adjustment creating the separately identifiable intangible asset recognised on acquisition relates to customer contracts. Goodwill arising on acquisition relates to the value added to the 2ergo product portfolio through Activemedia Technologies mobile value added services and solutions and to the access provided to the worlds fastest growing mobile phone markets, particularly in India. During the period from acquisition to 31 August 2009, the Activemedia Technologies group generated revenue of 181,000 and made a profit of 88,000. Net assets at 31 August 2009 are 260,000. Had the Activemedia Technologies group been part of the Group for the entire year to 31 August 2009, revenue would have increased by 513,000 and the operating profit would have increased by 220,000.
19 Related party transactions

During the year ended 31 August 2009, fees of 30,000 (2008: 26,668) were charged by another company for the services of K Seeley as non-executive director of the Company. At the year end, amounts owed in respect of these services were 2,500 (2008: 3,179). During the year the Group purchased tax advisory services to the value of 8,646 (2008: nil) from Target Consulting Limited, a company in which K Seeley, a non-executive director of the Company, is a director. These transactions were at arms length on normal commercial terms. At the year end the Group owed Target Consulting Limited nil (2008: nil) in respect of these services. During the year the Group purchased legal advisory services to the value of 350,909 (2008: 91,602) from Pannone LLP , a firm in which MS Caller, a non-executive director of the Company, is a consultant. These transactions were at arms length on normal commercial terms. At the year end the Group owed Pannone LLP 89,988 (2008: 1,998) in respect of these services. Prior to its acquisition of Broca plc on 8 April 2009, the Company already owned 19.2% of Broca plc. BA Sharples and NS Graham were executive directors of 2ergo Group plc and non-executive directors of Broca plc. Prior to the acquisition, recharges of 96,646 (2008: 114,960) were made to the Broca plc group. Also prior to the acquisition, the Group purchased services from the Broca plc group to the value of 16,533 (2008: nil). All transactions were at arms length and on normal commercial terms. At 31 August 2008 the amount due from the Broca plc group was 24,921. During the year ended 31 August 2008, the Group made available to Broca Communications Limited a loan facility secured over the assets of Broca Communications Limited and Broca plc. 500,000 of this facility had been drawn down at 31 August 2008. This loan was repayable within 18 months of the date that the facility was made available. The loan carried an interest rate of 3.5% above the base rate of Barclays Bank PLC, payable monthly in arrears. Following the acquisition this loan was eliminated on consolidation. None of the key management personnel of the Group owes any amounts to any company within the Group (2008: nil), nor are any amounts due from any company in the Group to any of the key management personnel (2008: nil). Other than the loan to Broca Communications Limited prior to the acquisition of Broca plc, related party receivables and payables are not secured and bear no interest.
63
Report of the Independent Auditor to the Members of 2ergo Group plc

We have audited the parent company financial statements of 2ergo Group plc for the year ended 31 August 2009 which comprise the parent company balance sheet and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the Companys members, as a body, in accordance with Sections 495 and 496 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Companys members those matters we are required to state to them in an auditors 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 Companys members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the Statement of Directors Responsibilities the directors are responsible for the preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the parent company 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 Boards (APBs) 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 APBs website at www.frc.org.uk/apb/scope/UKNP . Opinion on financial statements In our opinion the parent company financial statements: give a true and fair view of the state of the Companys affairs as at 31 August 2009; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Directors Report for the financial year for which the financial statements are prepared is consistent with the parent company financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. Other matter We have reported separately on the group financial statements of 2ergo Group plc for the year ended 31 August 2009. Joanne Kearns, Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, , Chartered Accountants, Manchester, 20 November 2009. 64
Company Balance Sheet

as at 31 August 2009
Note Fixed assets Investments in subsidiaries Fixed asset investments 4 4 15,656 15,656 Current assets Debtors Cash at bank and in hand 5 1,697 5,066 6,763 Current liabilities Creditors: amounts falling due within one year Net current assets Total assets less current liabilities Creditors: amounts falling due after more than one year Net assets Capital and reserves Share capital Share premium Investment in own shares Merger relief reserve Profit and loss account Shareholders funds 8 8 9 9 9 335 7,724 (1,373) 3,375 4,259 14,320 306 7,724 4,236 12,266 7 6 (1,363) 5,400 21,056 (6,736) 14,320 (2,496) 7,865 12,226 12,226 1,496 8,865 10,361 357 4,004 4,361 2009 000 2008 000
These financial statements were approved by the Board on 20 November 2009 and signed on its behalf by J Collighan Director NS Graham Director
65
Notes to the Company Financial Statements

1 Accounting policies
Basis of preparation The Company financial statements have been prepared in accordance with the Companies Act 2006 and applicable United Kingdom accounting standards (UK GAAP). The financial statements have been prepared on a going concern basis under the historical cost convention. The measurement bases and principal accounting policies of the Company are set out below. The accounting policies have been applied throughout all periods presented in these financial statements. These accounting policies comply with each UK GAAP accounting standard that is mandatory for accounting periods ending on 31 August 2009. Taxation Current tax is the tax currently payable based upon the taxable profit for the period. Current tax liabilities are measured at tax rates that are expected to apply in the period of realisation based on tax rates and laws that have been enacted or substantively enacted at the balance sheet date. Investments Investments held as fixed assets are stated at cost less provision for impairment.
2 Company result for the financial year

2ergo Group plc has not presented its own profit and loss account as permitted by section 408 (4) of the Companies Act 2006. The profit for the financial year dealt with in the accounts of the Company is 23,000 (2008: 218,000).
3 Particulars of staff
The Company had no staff during the year (2008: no staff). Details of directors remuneration are contained in note 4 to the consolidated financial statements.
66
4 Investments
Investments in subsidiaries
000 Cost At 1 September 2008 Transfer from other investments Additions At 31 August 2009 357 4,004 11,295 15,656
Investment 2ergo Limited Marblesquare Limited Activemedia Technologies Limited Broca Limited (formerly Broca plc) Broca Communications Limited* Sure on Sight Limited* 2ergo Americas Inc* Georgia Holding Company Inc* M-Invent Inc* 2ergo Inc* Telitas US Inc* Proteus Movil SA* 2ergo Australia Pty Limited (formerly Wapfly Technologies Pty Limited)* Active Media Technologies Pvt Limited* *held indirectly
Principal activity Communications Communications Communications Holding company Secure mobile messaging development Dormant Communications Dormant Communications Dormant Dormant Communications Communications Communications
Country of incorporation England & Wales England & Wales England & Wales England & Wales England & Wales England & Wales United States United States United States United States United States Argentina Australia India
Class and percentage of shares held and voting rights Ordinary 100% A and B Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100%
Other investments
Fixed asset investment 000 Cost At 1 September 2008 Transfer to investment in subsidiaries At 31 August 2009 4,004 (4,004) -
On 8 April 2009, the Company acquired the entire issued share capital of Broca plc, a company incorporated in England & Wales, whose principal activity is the development of a secure mobile messaging service, in which it had previously held an investment of 19.2%.
67
5 Debtors
2009 000 Amounts owed from group undertakings Prepayments and accrued income Other debtors 1,528 66 103 1,697 2008 000 1,201 134 161 1,496
6 Creditors: amounts falling due within one year

2009 000 Trade creditors Amounts owed to group undertakings Corporation tax Deferred and contingent consideration Accruals and deferred income 85 1,013 22 154 89 1,363 2008 000 3 2,408 71 14 2,496
7 Creditors: amounts falling due after more than one year

2009 000 Deferred and contingent consideration 6,736 2008 000 -
8 Share capital and premium

The authorised share capital of the Company is 500,000,000 (2008: 500,000,000) ordinary shares of 1p each. The share capital allotted, called up and fully paid at 31 August 2009 was 33,506,694 (2008: 30,633,838) ordinary shares of 1p each, of which 1,000,000 (2008: nil) were held in treasury.
Share capital 000 306 29 335 Share premium 000 7,724 7,724
Number of shares At 1 September 2008 Issue of share capital (net of issue costs) At 31 August 2009 30,633,838 2,872,856 33,506,694
Total 000 8,030 29 8,059
On 8 April 2009, the Company issued 2,872,856 1p ordinary shares pursuant to the acquisition of the entire issued share capital of Broca plc. During the year to 31 August 2009, the Company purchased the following shares into treasury.
Total consideration 000 1,096 277 1,373
Date purchased 28 November 2008 29 July 2009
Number purchased 750,000 250,000 1,000,000
68
9 Movement in reserves and total shareholders funds

Share capital 000 Balance at 1 September 2008 Issue of share capital Purchase of shares into treasury Profit for the year Balance at 31 August 2009 306 29 Share premium account 000 7,724 Investment in own shares 000 Merger relief reserve 000 3,375 Profit and loss account 000 4,236
Total 000 12,266 3,404 (1,373) 23 14,320
(1,373)
23 4,259
335
7,724
(1,373)
3,375
10 Related party transactions

During the year ended 31 August 2009, fees of 30,000 (2008: 26,668) were charged by another company for the services of K Seeley as non-executive director of the Company. At the year end, amounts owed in respect of these services were 2,500 (2008: 3,179). During the year ended 31 August 2009 the Company purchased legal advisory services to the value of 269,966 (2008: 24,547) from Pannone LLP a firm in which MS Caller, a non-executive director of the Company, is a consultant. , These transactions were at arms length on normal commercial terms. At the year end the Company owed Pannone LLP 83,375 (2008: nil) in respect of these services. The directors have taken advantage of the exemption in IFRS 8 and have not disclosed transactions with other group undertakings.
69
Company Information
Directors K Seeley (NonExecutive Chairman) BA Sharples (Joint Chief Executive Officer) NS Graham (Joint Chief Executive Officer) J Collighan (Finance Director) MS Caller (NonExecutive Director) Secretary Company number Registered office and business address J Collighan 5010663 4th Floor, Digital World Centre 1 Lowry Plaza The Quays Salford Manchester M50 3UB NatWest Bank plc 6th Floor 1 Spinningfields Square Manchester M3 3AP Pannone LLP 123 Deansgate Manchester M3 2BU Grant Thornton UK LLP Registered Auditors Chartered Accountants 4 Hardman Square Spinningfields Manchester M3 3EB Numis Securities Limited 10 Paternoster Square London EC4M 7LT Numis Securities Limited 10 Paternoster Square London EC4M 7LT
Bankers
Solicitors
Auditors
Nominated Adviser
Broker
70
Global Head Office 2ergo Group plc 4th Floor Digital World Centre 1 Lowry Plaza The Quays Salford Manchester M50 3UB United Kingdom Call +44 (0) 161 8744 222 Email enquiries@2ergo.com Web www.2ergo.com Mobile Web 2ergo.mobi

2ergo - Annual Report Year 2009

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2ergo - Annual Report Year 2009

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Annual Report + Accounts 2008/2009

Digital leaders in a mobile world

Annual Report + Accounts 2008 / 2009

Adjusted basic earnings per share (pence)

Stated after applying 2008 effective tax rate to 2007 EPS

Annual Report + Accounts 2008 / 2009

Annual Report + Accounts 2008 / 2009

Revenue Direct/Business Partner Wholesale Reseller Channel

2009 000 11,720 10,973 22,693

2008 000 9,071 23,494 32,565

% Change +29% -53% -30%

Gross Profit Direct/Business Partner Wholesale Reseller Channel

2009 000 10,058 829 10,887

2008 000 8,013 1,756 9,769

% Change +26% -53% +11%

Annual Report + Accounts 2008 / 2009

Annual Report + Accounts 2008 / 2009

Annual Report + Accounts 2008 / 2009

Solutions and Services

Mobile Internet & Publishing

Mobile Ticketing & Coupons Mobile Security & Advanced Messaging

Annual Report + Accounts 2008 / 2009

People currently send two trillion messages per day worldwide.

Case Study: AT&T

Multi-channel mobile marketing campaigns add value to customer experience

Annual Report + Accounts 2008 / 2009

Mobile Internet and Publishing

Case Study: Australian Broadcasting Corporation (ABC)

Annual Report + Accounts 2008 / 2009

Case Study: Rightmove

Creating the number one ranking iPhone property application

Annual Report + Accounts 2008 / 2009

Mobile Ticketing and Coupons

Case Study: Orange Wednesdays

Annual Report + Accounts 2008 / 2009

Mobile Security and Advanced Messaging

International mobile money transfer services to exceed $65bn by 2014.

Annual Report + Accounts 2008 / 2009

Business Partner Programme

Case Study: Mobile Partner to Ogilvy & Mather: Hopenhagen

Enabling global engagement through mobile technology worldwide

Reveal the Infinite

Annual Report + Accounts 2008/2009

Statement of Directors Responsibilities

Report of the Independent Auditor to the Members of 2ergo Group plc

Consolidated Income Statement

All activities relate to continuing operations.

Consolidated Balance Sheet

Consolidated Statement of Changes in Equity

267 (59) 813

(2,995) 320 (2,675) 2,535 (140) 59 6,089

(2,995) 320 (2,675) 2,535 (140) 588 267 75 16,106

3,194 (150) 5,438 (184) 5,254 11,343

3,194 (150) 5,438 (184) 5,254 3,404 (1,373) 101 23,492

Consolidated Cash Flow Statement

Notes to the Consolidated Financial Statements

The aggregate payroll costs of these persons was:

Directors remuneration Remuneration of directors during the year was as follows:

6 Income tax expense

7 Earnings per share

Loss 000 (184)

Earnings per share pence 8.54