RNS Number:0271C
Xpertise Group PLC
14 August 2007
FOR RELEASE 7.00AM 14 AUGUST 2007
XPERTISE GROUP PLC
("the group" or "the company")
Xpertise is one of the UK's leading IT Training companies
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007
Highlights
> Results
* Revenue up 35% to #10.6 million (June 2006: #7.8 million)
* Operating profit before non-recurring items up 70% to #189,000 (June
2006: #111,000*)
* Profit before tax up 53% to #191,000 (June 2006: #125,000*)
* Cash and cash equivalents of #2.1 million (31 December 2006: #1.5
million)
* Strong contribution from substantial new contracts
* Comparative figures have been adjusted following the publication of results
under International Financial Reporting Standards
> Outlook
* The Board looks forward to the second half of 2007 with optimism
* The Board will continue to explore corporate opportunities to enhance
shareholder value
For further information:
Xpertise Group PLC
Richard Last (Chairman) 01865 310150
Ian Johnson (Managing Director) 0113 382 6150
Daniel Stewart & Company PLC
Lindsay Mair 020 7776 6550
Cubitt Consulting
Brian Coleman-Smith 020 7367 5100
James Verstringhe
Background
Xpertise is one of the UK's leading providers of authorised IT, professional and
soft skills training and has a network of training centres located in London,
Thames Valley, Leeds, Manchester, East Midlands and Tyne & Wear. It has 45 fully
equipped training rooms offering a capacity of approximately 500 delegate
places. Training is also carried out at customer locations. There are 34 full
time instructors and over 100 associate instructors available to deliver
training throughout the UK.
Xpertise provides the UK's widest range of authorised IT training - covering
every major IT subject and certification. Xpertise offers over 400 courses
through its extensive public schedule including: A+ and Network+, CheckPoint,
Cisco, Citrix, Help Desk, IBM, ITIL - service management, Java, Linux/Unix,
Lotus, Microsoft, Novell, OO, Oracle, project management and Red Hat.
Training Services, a division of Xpertise, offers clients a fully managed,
tailored and bespoke service for large re-skilling programmes, project
management programmes and new technology roll-outs. A training service can
include elements of blended learning, e-learning, mentoring, seminars, skills
consulting, workshops and training needs analysis.
Xpertise also provides a range of 'soft-skills' courses. These include personal,
management and team development courses, customer service and computer
applications training, including training associated with large desk top roll
out projects.
XPERTISE GROUP PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007
CHAIRMAN'S STATEMENT
INTRODUCTION
I am pleased to report that the group has made substantial progress in all its
key areas of business in the first half of 2007 with revenue up by 35%.
Revenue of technical IT and professional skills training increased by 19%
compared to the same period last year. This level of organic growth is
particularly pleasing given that overall revenue in this division declined by 3%
in the last full year. The improvement reflects the investment in sales
personnel and increase in capacity at our training centres.
Training Services has benefited from securing two substantial training
agreements early in 2007 with a government organisation and with Computacenter.
These new agreements have contributed strongly to revenue growth in the first
half and accounted for 14% of total sales.
The soft skills division also contributed positively in the opening half.
Although revenue declined by 20% compared with the previous period due to the
completion of three substantial end user desktop roll out programmes, the
division is now marketing its products throughout the Xpertise customer base
with several significant projects either currently being delivered or in
prospect.
FINANCIAL REVIEW
Results
In our first results published under International Financial Reporting Standards
('IFRS'), revenue has increased by 35% from #7.8 million to #10.6 million and
operating profit before non-recurring items improved by 70% from #111,000 to
#189,000. Non-recurring items of #35,000 (2006: #nil) related to the costs of
the reduction of capital and to one-off commencement costs of specific large new
contracts. After net finance income of #37,000 (2006: #14,000), profit before
taxation was #191,000 (2006: #125,000). No tax is payable and profit for the
period was #191,000 (2006: #125,000).
Earnings per share increased by 53% to 3.61p (2006: 2.36p).
At 30 June 2007, the group had cash and cash equivalents of #2.1 million (31
December 2006: #1.5 million).
International Financial Reporting Standards ('IFRS')
These interim results incorporate the effects of the group's implementation of
IFRS in the first half of 2007 and the restatement to IFRS of prior year
comparatives and 2006 opening balances. Under IFRS the impact on the 2007 first
half results is as follows:
* Operating profit is reported after the impact of employee holiday
accrual expense of #48,000 (2006: #36,000).
* Goodwill was previously amortised in the income statement on a straight
line basis resulting in a previously reported charge of #172,000 in the
six months ended 30 June 2006 and #347,000 in the year ended 31 December
2006. Under IFRS goodwill is not amortised but instead is subject to
annual impairment tests and as a result, operating profit is now reported
after goodwill amortisation of #nil (2006: #nil).
Reduction of Capital and Dividend
Following the passing of a special resolution by shareholders at the company's
Annual General Meeting held on 16 April 2007 and following confirmation by an
Order of the High Court of Justice, Chancery Division, the amount standing to
the credit of the company's share premium account was reduced by #9,164,000 on 6
June 2007. The effect of this is to eliminate the deficit on the company's
retained earnings so that the company is able to pay dividends in the future.
Although no interim dividend is proposed, subject to continuing satisfactory
trading in the second half of 2007 and subject to the working capital
requirements of the group, we intend to pay a final dividend.
BUSINESS REVIEW
Xpertise is one of the UK's leading providers of authorised IT, professional and
soft skills training and has a network of training centres located in London,
Thames Valley, Leeds, Manchester, East Midlands and Tyne & Wear. We have
recently expanded our training delivery capacity and these centres now have 45
fully equipped training rooms offering a capacity of approximately 500 delegate
places. Training is also carried out at customer locations. There are 34 full
time instructors and over 100 associate instructors available to deliver
training throughout the UK.
Technical IT training
Xpertise offers over 400 technical training courses and programmes for IT
professionals and developers, covering all the major areas of IT.
Technical IT training revenue increased by 19% compared to 2006. Significant
training programmes have been completed for Accenture, Atos, BT, HSBC and
Sainsbury's. Leading edge technology courses have been delivered to customers on
new Microsoft technologies including SQL Server 2005, Visual Studio 2005, .Net
3.0, Vista and Office System 2007.
Professional skills
Xpertise is fully accredited by the ISEB to deliver ITIL service management
courses and by the APM Group for the delivery of PRINCE2 project management and
MSP training. Revenue of professional skills training was up by 19% in the
period.
Soft skills
Xpertise provides soft skills training, including personal, management and team
development, customer service and customer applications training. In 2006 three
substantial training programmes were carried out, with only one of these
extending into 2007. As a result, revenue for this division was down by 20% to
#543,000. Soft skills training is now being successfully sold to the wider
Xpertise customer base including BT, Microsoft and HM Revenue and Customs.
Training services
Training Services provides customers with fully managed training services
including the delivery of bespoke training for large reskilling projects. In
2007 we have successfully delivered managed training services to a number of
large enterprises. In addition, we secured a major, three year, managed training
service for a government organisation which commenced in January 2007. We were
also appointed as a preferred supplier to Computacenter, again with effect from
January 2007. These two new agreements have contributed 14% of total revenue in
2007.
Gross profit
Gross profit percentage has reduced to 34.5% (2006: 37.9%) primarily as a result
of an increase in the proportion of the group's revenues that are delivered by
third parties at lower percentage returns. This is due to the increase in the
number of managed training service agreements which carry diverse training
requirements, some of which cannot be delivered through internal resources.
Overheads
We have maintained tight control of our cost base in the opening half whilst
continuing to invest in the business. Overhead costs as a percentage of revenue
reduced to 33% (2006: 36%).
Working capital
We have also maintained good working capital control in the opening half with
cash inflow from operating activities of #713,000 (2006: #112,000). We have
continued our capital investment programme by investing #158,000 (2006:
#103,000) in improvements to classroom facilities and business infrastructure.
BOARD AND EMPLOYEES
Clive Richards OBE resigned as a non-executive director of the company on 27th
March 2007 to concentrate on his other business interests. On behalf of the
Board, I would like to thank Clive for his valuable contribution to the
development of the group.
I would also like to thank all our employees for their considerable contribution
and commitment to the group over the last six months.
OUTLOOK
The group has made excellent progress in the opening half in our three key
business areas: technical IT, professional skills and soft skills training. I am
also encouraged by the successes we have achieved in 2007 in Training Services.
We look forward to the second half with optimism.
The Board will continue to explore corporate opportunities that will deliver
enhanced shareholder value.
Richard Last
Chairman
14 August 2007
Consolidated Income Statement
for the six months ended 30 June 2007
6 months ended Year ended
30 June 31 December
(unaudited) 2006
2006 (audited)
2007 restated restated
#000 #000 #000
---------------------------- ------ --------- ----------
Revenue 10,553 7,845 15,949
Cost of sales (6,909) (4,872) (9,924)
---------------------------- ------ --------- ----------
Gross profit 3,644 2,973 6,025
---------------------------- ------ --------- ----------
Administrative expenses
(including non-recurring items) (3,490) (2,862) (5,746)
---------------------------- ------ --------- ----------
Operating profit before non-recurring
items 189 111 279
Non-recurring items (35) - -
---------------------------- ------ --------- ----------
Operating profit 154 111 279
---------------------------- ------ --------- ----------
Finance income 42 19 50
Finance expense (5) (5) (10)
---------------------------- ------ --------- ----------
Net finance income 37 14 40
---------------------------- ------ --------- ----------
Profit before taxation 191 125 319
Taxation - - (12)
---------------------------- ------ --------- ----------
Profit for the period attributable to
equity holders of the parent 191 125 307
---------------------------- ------ --------- ----------
Earnings per share: 3.61p 2.36p 5.80p
Basic and diluted
---------------------------- ------ --------- ----------
The figures for the six months ended 30 June 2006 and the year ended 31 December
2006 have been restated in accordance with IFRS
Consolidated Balance Sheet
as at 30 June 2007
30 June 2007 30 June 2006 31 December
(unaudited) restated 2006
(unaudited) restated
(audited)
#000 #000 #000
------------------------- ------- ------- -------
Non-current assets
Intangible assets 5,229 5,229 5,229
Property, plant and equipment 516 484 520
------------------------- ------- ------- -------
5,745 5,713 5,749
------------------------- ------- ------- -------
Current assets
Stocks 98 96 93
Trade and other receivables 4,075 2,966 3,047
Cash and cash equivalents 2,053 1,184 1,498
------------------------- ------- ------- -------
6,226 4,246 4,638
------------------------- ------- ------- -------
Current liabilities
Trade and other payables 6,446 4,957 5,268
Borrowings - 17 -
Current tax liabilities 693 507 443
------------------------- ------- ------- -------
7,139 5,481 5,711
------------------------- ------- ------- -------
Net current liabilities (913) (1,235) (1,073)
------------------------- ------- ------- -------
Non-current liabilities
Convertible debt 190 180 185
Other - 40 40
------------------------- ------- ------- -------
190 220 225
------------------------- ------- ------- -------
Net assets 4,642 4,258 4,451
------------------------- ------- ------- -------
Capital and reserves attributable
to equity holders of the parent 3,515 3,515 3,515
Share capital
Share premium 156 9,320 9,320
Convertible debt reserve 50 50 50
Merger reserve 1,217 1,217 1,217
Retained earnings (296) (9,844) (9,651)
-------------- ------- ------- -------
Total equity 4,642 4,258 4,451
-------------- ------- ------- -------
The figures at 30 June 2006 and 31 December 2006 have been restated in
accordance with IFRS
Consolidated Cash Flow Statement
for the six months ended 30 June 2007
6 months to 30 June Year ended
31 December
2006 2006
2007 restated restated
(unaudited) (unaudited) (audited)
#000 #000 #000
------------------------- -------- ------- ---------
Cash flows from operating activities
Profit before taxation 191 125 319
Adjustments for: 162 132 277
Depreciation
Finance income (42) (19) (50)
Finance expenses 5 5 10
Share-based expenses - 12 23
Changes in stocks (5) (12) (9)
Changes in trade and other receivables (1,028) (462) (545)
Changes in trade and other payables 1,388 312 588
------------------------- -------- ------- ---------
Net cash inflow from operations 671 93 613
Interest received 42 19 50
------------------------- -------- ------- ---------
Net cash inflow from operating
activities 713 112 663
------------------------- -------- ------- ---------
Cash flows from investing activities
Acquisition of subsidiaries - (117) (157)
Purchase of property, plant and
equipment (158) (103) (291)
Disposal of property, plant and
equipment - - 8
------------------------- -------- ------- ---------
Net cash outflow from investing
activities (158) (220) (440)
------------------------- -------- ------- ---------
Cash flows from financing activities
Repayment of bank loans - (35) (52)
------------------------- -------- ------- ---------
Net cash outflow from financing
activities - (35) (52)
------------------------- -------- ------- ---------
Net cash inflow/(outflow) 555 (143) 171
Cash and cash equivalents at start of
period 1,498 1,327 1,327
------------------------- -------- ------- ---------
Cash and cash equivalents at end of
period 2,053 1,184 1,498
------------------------- -------- ------- ---------
The figures for the six months ended 30 June and the year ended 31 December 2006
have been restated in accordance with IFRS.
Consolidated Statement
of Changes In Equity
(unaudited)
for the six months
ended 30 June 2007
Issued Share Convertible Merger Retained
capital premium debt reserve reserve earnings Total
#000 #000 #000 #000 #000 #000
--------------------- ------ ------- -------- ------ ------- -----
At 1 January 2006 3,510 9,275 50 1,217 (9,981) 4,071
Issue of shares 5 45 - - - 50
Share-based payments - - - - 12 12
Profit for the period - - - - 125 125
--------------------- ------ ------- -------- ------ ------- -----
At 30 June 2006 3,515 9,320 50 1,217 (9,844) 4,258
--------------------- ------ ------- -------- ------ ------- -----
Share-based payments - - - - 11 11
Profit for the period - - - - 182 182
--------------------- ------ ------- -------- ------ ------- -----
At 31 December 2006 3,515 9,320 50 1,217 (9,651) 4,451
--------------------- ------ ------- -------- ------ ------- -----
Capital reorganisation
(note 9) - (9,164) - - 9,164 -
Profit for the period - - - - 191 191
--------------------- ------ ------- -------- ------ ------- -----
At 30 June 2007 3,515 156 50 1,217 (296) 4,642
--------------------- ------ ------- -------- ------ ------- -----
Notes to the Interim Results
1. Basis of preparation
The financial information presented in this documentation has been prepared in
accordance with International Financial Reporting Standards (IFRS) and
International Financial Reporting Interpretations Committee (IFRIC)
interpretations that are expected to be applicable for the year ending 31
December 2007. These are subject to ongoing review and endorsement by the
European Commission, and possible amendment by the International Accounting
Standards Board (IASB), and are therefore subject to possible change. Further
standards or interpretations may also be issued that could be applicable for the
year ending 31 December 2007. These potential changes could result in the need
to change the basis of accounting or presentation of certain financial
information from that presented in this document.
The group may need to review some accounting treatments used for the purpose of
this document as a result of emerging industry consensus on practical
application of IFRS and further technical opinions. This could mean that the
financial information in this document may require modification until the group
prepares its first complete set of IFRS financial statements for the year ending
31 December 2007.
The comparative figures for the year ended 31 December 2006 do not amount to
full statutory accounts within the meaning of S240 of the Companies Act 1985.
Those accounts which were prepared under UK GAAP have been reported on by the
group's auditors and delivered to the registrar of companies. The audit report
was unqualified, did not include references to matters to which the auditors
drew attention by way of emphasis without qualifying their report and did not
contain a statement under section 237(2) or (3) of the Companies Act 2005.
2. The financial statements have been prepared in accordance with all
adopted International Financial Reporting Standards (IFRSs) for the first time.
The disclosures required by IFRS 1 concerning the transition from UK GAAP to
IFRSs are given at the end of these notes to the interim results. The financial
statements have also been prepared in accordance with IFRSs adopted for use in
the European Union and therefore comply with Article 4 of the EU IAS Regulation.
3. IFRS 1: First-time adoption of International Financial Reporting
Standards
The rules for first-time adoption of IFRS are set out in IFRS 1, which requires
that the group establishes its IFRS accounting policies at its date of
transition, 1 January 2006, and applies these prospectively. The standard allows
a number of optional exemptions on transition to help companies simplify the
move to IFRS. The exemptions selected by the group are set out below:
Business Combinations (IFRS 3)
The group has elected to apply IFRS 3 prospectively from the date of transition
to IFRS rather than to restate previous business combinations.
Share-based Payment
The group has adopted the provisions of FRS 20 'Share-based payment' in its
financial statements for the six months ended 30 June 2006 and year ended 31
December 2006. The provisions of FRS 20 are in line with IFRS 2 and no changes
to the comparative figures are required.
The group has adopted the exemption to apply IFRS 2 'Share-based payment' only
to awards made after 7 November 2002 that had not vested by 1 January 2006.
Presentation of financial information
The layout of the primary financial information has been amended in accordance
with IAS 1 'Presentation of financial information' from that presented under UK
GAAP. This format and presentation may require modification as practice and
industry consensus develops.
4. Significant Accounting Policies
The principal accounting policies adopted are set out below.
Basis of consolidation
The consolidated interim financial statements incorporate the financial
statements of the company and entities controlled by the company (its
subsidiaries) for the six months ended 30 June 2007. Control is achieved where
the company has the power to govern the financial and operating policies of an
investee entity so as to obtain benefits from its activities.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the group. All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
Acquisition method of accounting
The cost of the acquisition is measured at the aggregate of the fair values, at
the date of exchange, of assets given, liabilities incurred or assumed, and
equity instruments issued by the group in exchange for control of the acquiree,
plus any costs directly attributable to the business combination. The acquiree's
identifiable assets, liabilities and contingent liabilities that meet the
conditions for recognition under IFRS 3 are recognised at their fair value at
the acquisition date.
Merger method of accounting
Although IFRS 3 outlawed merger accounting, under IFRS 1, the group is not
required to restate acquisitions or business combinations prior to the date of
transition. Therefore, the group is permitted to retain its historical merger
accounting position in the consolidated accounts.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the group's interest in the fair value of the identifiable
assets and liabilities of a subsidiary. Goodwill is initially recognised as an
asset at cost and is subsequently measured at cost less any accumulated
impairment losses. Goodwill which is recognised as an asset is reviewed for
impairment at least annually. Any impairment is recognised immediately in the
income statement and is not subsequently reversed.
For the purpose of impairment testing, goodwill is allocated to each of the
group's cash-generating units expected to benefit from the synergies of the
combination. Cash-generating units to which goodwill has been allocated are
tested for impairment annually, or more frequently when there is an indication
that the unit may be impaired. If the recoverable amount of the cash-generating
unit is less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the
unit and then to the other assets of the unit pro rata on the basis of the
carrying amount of each asset in the unit. An impairment loss recognised for
goodwill is not reversed in a subsequent period.
Goodwill arising on other acquisitions before the date of transition to IFRS has
been retained at the previous UK GAAP amounts subject to being tested for
impairment at that date.
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for services provided in the normal
course of business, net of discounts, VAT and other sales related taxes. Income
is recognised when training services are delivered to customers.
Deferred income represents training courses invoiced in advance of delivery.
Operating profit
Operating profit is stated after charging non-recurring costs, but before
finance income and finance costs.
Plant and equipment
Fixtures and equipment are stated at cost less accumulated depreciation and any
recognised impairment loss.
Depreciation is charged so as to write off the cost or valuation of assets over
their estimated useful lives. The rates generally applicable are:
Leasehold improvements - Over the length of the lease
Computer equipment and software - 25%-50% per annum on cost
Fixtures, fittings and equipment - 10%-20% per annum on cost
Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying amount of
an asset or liability in the balance sheet differs from its tax base, except for
differences arising on:
* The initial recognition of goodwill
* Goodwill for which amortisation is not tax deductible;
* The initial recognition of an asset or liability in a transaction which
is not a business combination and at the time of the transaction affects
neither accounting nor taxable profit; and
* Investments in subsidiaries and jointly controlled entities where the
group is able to control the timing of the reversal of the difference and
it is probable that the difference will not reverse in the foreseeable
future.
Recognition of deferred tax assets is restricted to those instances where it is
probable that taxable profit will be available against which the difference can
be utilised.
The amount of the asset or liability is determined using tax rates that have
been enacted or substantially enacted by the balance sheet date and are expected
to apply when the deferred tax liabilities/(assets) are settled/(recovered).
Deferred tax balances are not discounted.
Deferred tax assets and liabilities are offset when the group has a legally
enforceable right to offset current tax assets and liabilities and the deferred
tax assets and liabilities relate to taxes levied by the same tax authority on
either:
* The same taxable group company; or
* Different group entities which intend either to settle current tax
assets and liabilities on a net basis, or to realise the assets and settle
the liabilities simultaneously, in each future period in which significant
amounts of deferred tax assets or liabilities are expected to be settled or
recovered.
Stocks
Stocks are valued at the lower of cost and net realisable value. Cost is based
on the cost of purchase on a first in, first out basis. Net realisable value is
based on estimated selling price.
Loans and receivables
These assets are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They arise principally through
the provision of goods and services to customers (trade debtors), but also
incorporate other types of contractual monetary asset. They are carried at cost
less any provision for impairment.
Leases and hire purchase contracts
Where assets are financed by leasing agreements that give rights approximating
to ownership (finance leases), the assets are treated as if they had been
purchased outright. The amount capitalised is the present value of the minimum
lease payments payable over the term of the lease. The corresponding leasing
commitments are shown as amounts payable to the lessor. Depreciation on the
relevant assets is charged to the income statement.
Lease payments are analysed between capital and interest components so that the
interest element of the payment is charged to the income statement over the
period of the lease and represents a constant proportion of the balances of
capital repayments outstanding. The capital part reduces the amounts payable to
the lessor.
All other leases are treated as operating leases. Their annual rentals are
charged to the income statement on a straight-line basis over the term of the
lease, even if the payments are not made on such a basis.
Other financial liabilities
These include trade payables and other short term monetary liabilities, which
are recognised at amortised cost.
Convertible debt
The proceeds received on issue of the group's convertible debt are allocated
into their liability and equity components. The amount initially attributed to
the debt component equals the discounted cash flows using a market rate of
interest that would be payable on a similar debt instrument that did not include
an option to convert. Subsequently, the debt component is accounted for as a
financial liability measured at amortised cost.
The difference between the net proceeds of the convertible debt and the amount
allocated to the debt component is credited directly to equity and is not
subsequently remeasured. If converted, the debt and equity elements are credited
to share capital and share premium, as appropriate.
Share-based employee remuneration
The fair value of options granted is recognised as an employee expense, with a
corresponding increase in equity reserves. The fair value is recognised at the
grant date and spread over the period the employees become unconditionally
entitled to the options. The fair value of the options granted is measured using
the binomial option pricing model, taking into account the terms and conditions
on which the options were granted. The amount recognised as an expense is
adjusted to reflect the actual number of share options that vest except where
variations are due only to share prices not achieving the threshold for vesting.
Pension costs
Contributions to the group's defined contribution pension schemes are charged to
the income statement in the period in which they become payable.
Provisions
Provisions are recognised when the group has a present obligation as a result of
a past event, and it is probable that the group will be required to settle that
obligation. Provisions are measured at the directors' best estimate of the
expenditure required to settle the obligation at the balance sheet date, and are
discounted to present value where the effect is material.
5. Segmental information
The group's sole activity is the provision of IT technical, professional and
soft skills training in the UK. No further analysis or segmental reporting of
results is therefore appropriate.
6. Non-recurring items
The non-recurring items relate to the costs of the capital reorganisation and to
start-up costs relating to substantial new contracts which commenced in 2007.
7. Earnings per share
Basic earnings per share has been calculated by dividing profit after tax of
#191,200 (six months to 30 June 2006 - profit of #124,949) by the number of
shares in issue during the period of 5,300,616 (six months to 30 June 2006 -
5,291,455).
8. Dividend
The Board has not declared a dividend for the period ended 30 June 2007.
9. Reduction of share premium account
On 6 June 2007, the company reduced its share premium account by #9,164,000 by a
special resolution confirmed by an Order of the High Court of Justice, Chancery
Division.
10. Date of approval of Interim Report
This interim report was approved by the Board of directors on 14 August 2007.
Copies of this statement are being sent to all shareholders. Copies are also
available at the registered office of the company: Islington House, Brown Lane
West, Leeds, LS12 6BD.
Explanatory Notes to the UK GAAP to IFRS Reconciliations
Introduction
The group financial statements have been prepared in accordance with
International Accounting and Financial Reporting Standards ("IFRS") and are
presented in UK sterling. The reconciliations below have been prepared on the
basis that all IFRSs, International Financial Reporting Interpretation Committee
("IFRIC") interpretations, and current IASB exposure drafts will be issued as
final standards and adopted by the European Commission. The main differences
between the group financial statements prepared according to UK GAAP and those
under International Accounting Standards are that goodwill is not amortised, but
instead is subject to an annual impairment review and that provision is made for
a vacation accrual at each period end. The consolidated financial statements
have been prepared on a historical cost basis.
1. Transition date and first-time adoption of IFRS: the group's
transition date to IFRS is 1 January 2006. All adjustments on first-time
adoption were recorded in shareholders' equity on the date of transition.
IFRS 1 'First-Time Adoption of International Financial Reporting Standards' sets
out the transition rules which must be applied when IFRS is adopted for the
first time. As a result, certain of the requirements and options in IFRS 1 may
result in a different application of accounting policies in the 2006 restated
financial information from that which would apply if the 2006 financial
statements were the first financial statements.
The standard sets out certain mandatory exemptions to retrospective application
and certain optional exemptions.
The most significant optional exemptions available that have been taken by the
group are as follows:
(a) Business combinations effected before 1 January 2006, including those
that were accounted for using the merger method of accounting under UK
accounting standards, have not been restated. The carrying amount of capitalised
goodwill at 31 December 2005 that arose on business combinations accounted for
using the acquisition method under UK GAAP was frozen at this amount and tested
for impairment at 1 January 2006.
(b) The group has adopted the exemption to apply IFRS 2 'Share-based
payment' only to awards made after 7 November 2002 that had not vested by 1
January 2006.
2. Goodwill amortisation and impairment: under UK GAAP goodwill was
amortised through the Income Statement on a straight-line basis and impairment
reviews were carried out periodically or when a specific event occurred. Under
IAS 38, goodwill is not amortised through the Income Statement but instead is
subject to an annual test for impairment which may result in adjustments in the
Income Statement and the Balance Sheet.
3. Vacation accrual: under IAS 19 'Employee Benefits', an accrual has
been made for the full monetary value of holiday to which staff and temporary
workers are entitled but, at the balance sheet date, had not been taken.
Explanation of principal differences between the cash flow statements presented
under UK GAAP and the cash flow statements presented under IFRS
The cash flow statement has been prepared in conformity with IAS 7 'Cash Flow
Statements'. The principal differences between the 2006 cash flow statement
presented in accordance with UK GAAP and the cash flow statement presented in
accordance with IFRS for the same periods are as follows:
(i) Under UK GAAP, net cash flow from operating activities was determined
before considering cash outflows from (a) returns on investments and servicing
of finance, and (b) taxes paid. Under IFRS, these two sections of the cash flow
statement do not exist and the related cash flows are categorised as operating,
investing or financing as appropriate.
(ii) Under UK GAAP, acquisitions are separately classified, while under
IFRS, they are included within investing activities.
Reconciliation of Consolidated Income Statement
for the six months ended 30 June 2006
Reported IAS 19 IFRS 3 Total Restated
Under Employee Business Effect of under
UK GAAP benefits combinations Transition IFRS
To IFRS
#000 #000 #000 #000 #000
----------------- ------- ------- --------- ------- -------
Revenue 7,845 - - - 7,845
Cost of sales (4,872) - - - (4,872)
----------------- ------- ------- --------- ------- -------
Gross profit 2,973 - - - 2,973
Administrative
expenses (2,998) (36) 172 136 (2,862)
----------------- ------- ------- --------- ------- -------
Operating
profit/(loss) (25) (36) 172 136 111
----------------- ------- ------- --------- ------- -------
Operating profit before
goodwill amortisation and
exceptional items 147 (36) - (36) 111
Amortisation of goodwill (172) - 172 172 -
----------------- ------- ------- --------- ------- -------
Operating profit/(loss) (25) (36) 172 136 111
Finance income 19 - - - 19
Finance expenses (5) - - - (5)
----------------- ------- ------- --------- ------- -------
Profit/(loss) before tax (11) (36) 172 136 125
Taxation - - - - -
----------------- ------- ------- --------- ------- -------
Profit/(loss) for the
period (11) (36) 172 136 125
----------------- ------- ------- --------- ------- -------
Basic earnings per share (0.22p) (0.68p) 3.26p 2.58p 2.36p
----------------- ------- ------- --------- ------- -------
Reconciliation of Consolidated Income Statement
for the year ended 31 December 2006
Reported IAS 19 IFRS 3 Total Restated
Under Employee Business Effect of under
UK GAAP benefits combinations Transition IFRS
To IFRS
#000 #000 #000 #000 #000
--------------------- ------- ------- ------- ------- -------
Revenue 15,949 - - - 15,949
Cost of sales (9,924) - - - (9,924)
--------------------- ------- ------- ------- ------- -------
Gross profit 6,025 - - - 6,025
Administrative
expenses (6,083) (10) 347 337 (5,746)
--------------------- ------- ------- ------- ------- -------
Operating profit/(loss) (58) (10) 347 337 279
--------------------- ------- ------- ------- ------- -------
Operating profit before
goodwill amortisation and
exceptional items 289 (10) - (10) 279
Amortisation of goodwill (347) - 347 347 -
--------------------- ------- ------- ------- ------- -------
Operating profit/(loss) (58) (10) 347 337 279
Finance income 50 - - - 50
Finance expenses (10) - - - (10)
--------------------- ------- ------- ------- ------- -------
Profit/(loss) before tax (18) (10) 347 337 319
Taxation (12) - - - (12)
--------------------- ------- ------- ------- ------- -------
Profit/(loss) for the
period (30) (10) 347 337 307
--------------------- ------- ------- ------- ------- -------
Basic earnings per share (0.56p) (0.19p) 6.55p 6.36p 5.80p
--------------------- ------- ------- ------- ------- -------
Reconciliation of Consolidated Balance Sheet
as at 1 January 2006
Reported IAS 19 Total Restated
under employee effect of under
UK GAAP benefits transition IFRS
to IFRS
#000 #000 #000 #000
---------------- ------ ------- ------- ------
Non-current assets
Intangible assets 4,979 - - 4,979
Property, plant and equipment 506 - - 506
---------------- ------ ------- ------- ------
5,485 - - 5,485
---------------- ------ ------- ------- ------
Current assets
Stocks 84 - - 84
Trade and other receivables 2,418 - - 2,418
Cash and cash equivalents 1,327 - - 1,327
---------------- ------ ------- ------- ------
3,829 - - 3,829
---------------- ------ ------- ------- ------
Current liabilities
Trade and other payables 4,683 22 22 4,705
Borrowings 52 - - 52
Current tax liabilities 311 - - 311
---------------- ------ ------- ------- ------
5,046 22 22 5,068
---------------- ------ ------- ------- ------
Non-current liabilities
Convertible debt 175 - - 175
Other - - - -
---------------- ------ ------- ------- ------
175 - - 175
---------------- ------ ------- ------- ------
Net assets 4,093 (22) (22) 4,071
---------------- ------ ------- ------- ------
Capital and reserves
Share capital 3,510 - - 3,510
Share premium 9,275 - - 9,275
Convertible debt reserve 50 - - 50
Merger reserve 1,217 - - 1,217
Retained earnings (9,959) (22) (22) (9,981)
---------------- ------ ------- ------- ------
Total equity 4,093 (22) (22) 4,071
---------------- ------ ------- ------- ------
Reconciliation of Consolidated Balance Sheet
as at 30 June 2006
Reported Opening IAS 19 IFRS 3 Total Restated
under balance employee business effect of under
UK GAAP sheet benefits combi- transition IFRS
adjustment nations to IFRS
#000 #000 #000 #000 #000 #000
-------------- ------- -------- ------ ------ ------ ------
Non-current assets
Intangible assets 5,057 - - 172 172 5,229
Property, plant
and equipment 484 - - - - 484
-------------- ------- -------- ------ ------ ------ ------
5,541 - - 172 172 5,713
-------------- ------- -------- ------ ------ ------ ------
Current assets
Stocks 96 - - - - 96
Trade and other
receivables 2,966 - - - - 2,966
Cash and cash
equivalents 1,184 - - - - 1,184
-------------- ------- -------- ------ ------ ------ ------
4,246 - - - - 4,246
-------------- ------- -------- ------ ------ ------ ------
Current liabilities
Trade and other
payables 4,899 22 36 - 58 4,957
Borrowings 17 - - - - 17
Current tax
liabilities 507 - - - - 507
-------------- ------- -------- ------ ------ ------ ------
5,423 22 36 - 58 5,481
-------------- ------- -------- ------ ------ ------ ------
Non-current
liabilities
Convertible debt 180 - - - - 180
Other 40 - - - - 40
-------------- ------- -------- ------ ------ ------ ------
220 - - - - 220
-------------- ------- -------- ------ ------ ------ ------
Net assets 4,144 (22) (36) 172 114 4,258
-------------- ------- -------- ------ ------ ------ ------
Capital and
reserves
Share capital 3,515 - - - - 3,515
Share premium 9,275 - - 45 45 9,320
Convertible debt
reserve 50 - - - - 50
Merger reserve 1,262 - - (45) (45) 1,217
Retained earnings (9,958) (22) (36) 172 114 (9,844)
-------------- ------- -------- ------ ------ ------ ------
Total equity 4,144 (22) (36) 172 114 4,258
-------------- ------- -------- ------ ------ ------ ------
Reconciliation of Consolidated Balance Sheet
as at 31 December 2006
Reported Opening IAS 19 IFRS 3 Total Restated
under balance employee business effect of under
UK GAAP sheet benefits combi- transition IFRS
adjustment nations to IFRS
#000 #000 #000 #000 #000 #000
-------------- ------- -------- ------ ------ ------ ------
Non-current assets
Intangible assets 4,882 - - 347 347 5,229
Property, plant
and equipment 520 - - - - 520
-------------- ------- -------- ------ ------ ------ ------
5,402 - - 347 347 5,749
-------------- ------- -------- ------ ------ ------ ------
Current assets
Stocks 93 - - - - 93
Trade and other
receivables 3,047 - - - - 3,047
Cash and cash
equivalents 1,498 - - - - 1,498
-------------- ------- -------- ------ ------ ------ ------
4,638 - - - - 4,638
-------------- ------- -------- ------ ------ ------ ------
Current liabilities
Trade and other
payables 5,236 22 10 - 32 5,268
Borrowings - - - - - -
Current tax
liabilities 443 - - - - 443
-------------- ------- -------- ------ ------ ------ ------
5,679 22 10 - 32 5,711
-------------- ------- -------- ------ ------ ------ ------
Non-current
liabilities 185 - - - - 185
Convertible debt
Other 40 - - - - 40
-------------- ------- -------- ------ ------ ------ ------
225 - - - - 225
-------------- ------- -------- ------ ------ ------ ------
Net assets 4,136 (22) (10) 347 315 4,451
-------------- ------- -------- ------ ------ ------ ------
Capital and reserves
Share capital 3,515 - - - - 3,515
Share premium 9,275 - - 45 45 9,320
Convertible debt
reserve 50 - - - - 50
Merger reserve 1,262 - - (45) (45) 1,217
Retained earnings (9,966) (22) (10) 347 315 (9,651)
-------------- ------- -------- ------ ------ ------ ------
Total equity 4,136 (22) (10) 347 315 4,451
-------------- ------- -------- ------ ------ ------ ------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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