ADT.L Regulatory News (ADT)

18 Jul 2008 07:00



AdEPT Telecom plc

18 July 2008

AdEPT Telecom plc

("AdEPT" or the "Company")

Final results for the year ended 31 March 2008

AdEPT, a leading independent provider of award-winning telecommunications

services for fixed line, mobile and data, announces its results

for the year ended 31 March 2008.

Financial Highlights

Revenue increased by 25% to £23.6 million driven by the acquisitions made during this year and the previous period;

EBITA excluding non-recurring costs increased by 30% to £3.2 million;

EBITA margin excluding non-recurring costs up from 12.9% of sales in 2007 to 13.4% in 2008; 

97% of EBITA (£1.8m) turned into cash generated from operations (£1.8m) (114% in 2007); and

Adjusted earnings per share, after adding back amortisation and non-recurring costs up 48% to 11.43p per share (2007: 7.71p).

Operational Highlights

Acquired two of our competitors' customer bases, including Telecom Direct with £12m sales per annum;.

Completed the integration of both acquisitions within six weeks;

Achieved a higher mix of business customers with total business revenue up from 87% at March 2007 to 93% this year, increasing the stability of our overall customer base; 

Customer churn reduced substantially in the year and continued growth in organic sales channels;

Direct debit customers now 66% of revenue, up from 58% March 2007;

Excellent progress in increasing revenue from fixed monthly charges, with line rental revenues at March 2008 up 86% at £7.8m (2007: £4.2m); 

Line rental and data products represented 35% of total revenues at March 2008 (23% March 2007); and 

Administration costs (excluding one-off restructuring costs) fell from 26% of revenue in 2007 to 23% in 2008.

Commenting upon these results Chairman Roger Wilson said:

"We are delighted to report another strong set of results. The business continues to be strongly cash generative, with an EBITA: Sales ratio amongst the sector's leaders. The integration of Telecom Direct was completed within our normal six weeks and the call centre and operations departments were transferred to Tunbridge Wells in January 2008."

Enquiries:

AdEPT Telecom	Roger Wilson Chairman	07786111535
Strand Partners	Simon Raggett Chief Executive	020 7409 3494
Landsbanki	Sindre Ottesen	0207 426 9000

CHAIRMAN'S STATEMENT

It is with great pleasure that I announce our annual results. 

For the year ended 31 March 2008 AdEPT Telecom plc ("AdEPT" or the "Company") delivered another strong trading performance. 

Review of Operations

The business was established to be a consolidator of the highly fragmented UK fixed line reseller sector which is estimated to comprise approximately 1,000 mostly smaller telecom businesses. To date AdEPT has acquired 16 competitors and/or their customer bases of which the two listed below were completed in the period under review:

June 2007	the remaining part of Fizz Telecom Limited ("Fizz Telecom") not acquired in June 2006
December 2007	Telecom Direct Limited ("Telecom Direct")

A critical element of our acquisition strategy is the ability to integrate the acquired customer bases into AdEPT's systems within 6 weeks. Both of the acquisitions referred to above were integrated within this timeframe. Rapid integration into AdEPT's automated back office systems significantly enhances the profitability of the acquired customer bases.

We are fast achieving our strategic aim of making our customer base more stable by moving away from lower-spending, higher churn residential customers to focus on business customers. In the year to 31 March 2008, 93% of group revenues were derived from business customers compared to 87% in the prior period. This reversal of customer focus has been driven by the recent acquisitions; all of which continue to be focused on business customers. 

Our retention and customer service teams have reduced customer churn substantially in the year. Our indirect sales channel of independent business partners continues to grow with over 60 partners active in bringing us new customers in the second half of the year. We have seen an increase in the size of new customers with important wins such as nine of the regional Probation Services, and a further two awarded since year end.

Growing line rental revenues has been a key objective and we are delighted to report line rental revenues increased 86% to £7.8m compared to £4.2m in the prior year. Our revenue is becoming more stable as we reduce our reliance on variable monthly call charges, replacing them with fixed monthly line rentals.

Employees

As a company we are immensely proud of the track record we have created in a relatively short period of time. Our success is a result of the efforts of all our employees and on behalf of the Board I would like to take this opportunity to thank them for all their hard work.

Outlook

As we enter a period of economic uncertainty the business is in a much stronger position than before with a more stable customer base, a higher proportion of fixed monthly revenues and more customers paying by Direct Debit. We will focus very closely on our debtors to ensure payment terms do not get extended.

The business focus for this coming year is to continue to increase organic sales and customer retention. We will therefore invest more in our organic sales channels and complement this with continued investment in retention activities to retain more customers. The launch of our new Telesales team in February 2008 allows us to target up-selling of products and contract renewals to our existing customers along with new customer acquisition.

Roger Wilson

Chairman

18 July 2008

FINANCE DIRECTOR'S REPORT

A SUMMARY of our three year financial performance is set out in the following table:

	Year ending March
	2008 £'000	YOY Growth %	2007 £'000	YOY Growth %	2006 £'000
Revenue	23,618	25%	18,827	63%	11,521
EBITA* excluding non-recurring costs	3,161	30%	2,427	41%	1,724
Retained earnings (add back amortisation and non-recurring costs)	2,408	48%	1,625	47%	1,109

* Earnings Before Interest, Tax & Amortisation

REVENUE in 2008 increased by 25% to £23.6m (2007: £18.8m) with growth primarily derived from the two acquisitions completed during the year. There was a substantial change in the customer mix and as a result, 93% (2007: 87%) of revenue was derived from business customers. The introduction of line rental in March 2005 and Broadband data products in 2007 has had a marked impact on the proportion of revenue which is now fixed monthly values. These fixed monthly revenues now represent 35% (2007: 22%) of total revenue for the year and at March 2008 represents 37% of total revenue (March 2007: 24%).

GROSS MARGIN has decreased to 37.1% (2007: 38.7%). Margins for calls, lines and broadband have again remained stable. However, the net impact on overall margin is a decrease as lower margin line rental and broadband revenue is now an increased proportion of the total.

 

ADMINISTRATION COSTS (excluding depreciation, amortisation and non-recurring costs) have increased to £5.5m which is 23% of revenue (2007: 26%). The non-recurring costs are those incurred in the Telecom Direct division which will not recur next year. The bulk of these costs are represented by staff, property and leases, which when stripped out leave the underlying administrative costs for the business. These underlying costs have increased as the business has increased in size, although the benefits of scale mean that costs have gone up less than revenue such that they are a lower proportion of revenue.

We remain one of the lowest cost operators in the industry.

EBITA excluding non-recurring costs has increased to 13.4% of revenue (2007: 12.9%), which represents the underlying EBITA of the business. This has increased as a proportion of revenue as the fixed costs are removed from the acquisitions. 

EARNINGS PER SHARE based on retained earnings adding back amortisation and non-recurring costs (see note 5) has increased by 48% to 11.43p per share (2007: 7.71p). 

CASHFLOW is strong as the group benefits from an excellent operating cash model, with again the EBITA turned into cash. EBITA as a proportion of cash generated from operations is 97% (2007: 114%).

CAPITAL EXPENDITURE on tangible assets is low at 0.8% of revenue. Expenditure on intangible assets was £7.4m (2007: £4.3m), invested in the acquisition of two customer bases during the year.

NET DEBT which comprises cash balances and bank borrowings, increased by £8.4m to £11.3m (2007: £2.9m). This bank financing increased to £11.5m from £4.3m to fund the two acquisitions.

POST YEAR END there are no matters to note. 

TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

As required by EU regulations, our results are now prepared under IFRS. As part of the transition the main area under consideration due to the transition to IFRS is the treatment of the goodwill arising on acquisition of our customer bases. As can be seen in Note 2.5, our accounting policy on intangible fixed assets and amortisation, we have re-classified our goodwill as an intangible asset "Customer Base" as it meets the test of being an identifiable non-monetary asset without physical substance. The asset is the customer contracts with the value being the benefit AdEPT will derive from the future cashflows from those specific customer contracts. Goodwill, which represents future economic benefit arising from assets that cannot be identified individually and recognised separately, is therefore zero in our accounts as at 31 March 2007.

The intangible "Customer Base" assets, which are all considered to have finite lives, are recorded at cost, amortised over their useful economic life and tested for impairment at the end of the first full year or following any indication of possible impairment.

Therefore as the treatment of intangible assets under FRS10 (UK GAAP) and IFRS3 & IAS38 (IFRS) are broadly consistent it is not anticipated that the accounting for intangible assets under IFRS will materially affect the presentation of the financial statements.

Following a review of other changes to accounting policies, the only other change is the reclassification of our billing system from tangible fixed assets to intangible fixed assets.

 

KEY PERFORMANCE INDICATORS (KPI's)

The KPI's outlined below are intended to provide useful information when interpreting the accounts. The KPI's outline the Company's position as at the final month of the year, March, which provides an indication of the starting point for the following financial year. Please note that this analysis only includes those customers who received a bill and we only bill customers if the bill exceeds £2.99.

Key Performance Indicators (as at 31 March)
	Year	Residential	Business	Total
CUSTOMER NUMBERS	2008	12,101	25,036	37,137
	2007	15,594	16,886	32,480
REVENUE BY PRODUCT
Line rental	2008	1.0%	32.2%	33.2%
	2007	0.0%	22.3%	22.3%
Calls	2008	6.9%	58.3%	65.2%
	2007	12.7%	64.4%	77.1%
Broadband	2008	0.0%	1.6%	1.6%
	2007	0.0%	0.6%	0.6%
Total	2008	7.9%	92.1%	100.0%
	2007	12.7%	87.3%	100.0%
Average spend per customer per month (ex VAT)	2008	£12.43	£91.80	£69.65
	2007	£10.90	£77.93	£45.75

Tim Holland

Finance Director

18 July 2008

CONSOLIDATED INCOME STATEMENT

For the year ended 31 March 2008

			2008	2007
		Note	£	£
REVENUE		4	23,617,846	18,827,007
Cost of sales			(14,863,741)	(11,535,949)
GROSS PROFIT			8,754,105	7,291,058
Administrative expenses		5	(6,854,998)	(4,801,219)
Analysed as :
Admin expenses before non-recurring costs			(5,474,060)	(4,801,219)
Non-recurring costs		5	(1,380,938)	-
EARNINGS BEFORE INTEREST TAXATION DEPRECIATION AND AMORTISATION			1,899,107	2,489,839
Analysed as :
EBITDA before non-recurring costs			3,280,045	2,489,839
Non-recurring costs		5	(1,380,938)	-
Depreciation		12	(119,034)	(62,848)
Amortisation of intangible fixed assets		11	(1,869,488)	(1,325,229)
OPERATING (LOSS)/PROFIT		5	(89,415)	1,101,762
Analysed as :
Operating profit before non-recurring costs			1,392,412	1,101,762
Non-recurring costs		5	(1,481,827)	-
Finance costs		7	(652,547)	(321,141)
Finance income			3,951	8,708
(LOSS)/PROFIT BEFORE INCOME TAX			(738,011)	789,329
Income tax expense		10	(104,732)	(489,539)
RETAINED EARNINGS (ACCUMULATED LOSSES)		19	(842,743)	299,790
Attributable to:
Equity holders of the parent			(842,743)	299,790
Earnings per share
Basic earnings per share		27	(4.00)p	1.42p
Diluted earnings per share		27	n/a	1.30p

All amounts relate to continuing operations. Details of acquisitions are set out in note 23. Notes 1-29 form part of these financial statements.

CONSOLIDATED BALANCE SHEET

As at 31 March 2008

			31 March	31 March
			2008	2007
		Note	£	£
ASSETS
Non-current assets
Intangible assets		11	22,514,209	14,654,018
Property, plant and equipment		12	280,119	158,377
Deferred income tax		13	713,093	17,563
			23,507,421	14,829,958
CURRENT ASSETS
Trade and other receivables		15	4,303,900	3,310,081
Cash and cash equivalents			154,930	1,340,213
			4,458,830	4,650,294
TOTAL ASSETS			27,966,251	19,480,252
CURRENT LIABILITIES
Trade and other payables		16	6,597,059	3,852,521
Income tax			103,261	753,905
Short term borrowings			922,633	-
			7,622,953	4,606,426
NON-CURRENT LIABILITIES
Long-term borrowings		17	10,527,367	4,250,000
TOTAL LIABILITIES			18,150,320	8,856,426
NET ASSETS			9,815,931	10,623,826
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
Share capital		18	2,106,744	2,106,744
Share premium		19	7,965,381	7,965,381
Retained earnings		19	(256,194)	551,701
TOTAL EQUITY			9,815,931	10,623,826

Notes 1-29 form part of these financial statements.

COMPANY BALANCE SHEET

As at 31 March 2008

			31 March	31 March
			2008	2007
		Note	£	£
ASSETS
Non-current assets
Intangible assets		11	22,514,209	14,654,018
Property, plant and equipment		12	280,119	158,377
Deferred income tax		13	713,093	17,563
			23,507,421	14,829,958
CURRENT ASSETS
Trade and other receivables		15	4,303,900	3,310,081
Cash and cash equivalents			154,930	1,340,213
			4,458,830	4,650,294
TOTAL ASSETS			27,966,251	19,480,252
CURRENT LIABILITIES
Trade and other payables		16	6,597,059	3,941,057
Income tax			103,261	665,369
Short term borrowings			922,633	-
			7,622,953	4,606,426
NON-CURRENT LIABILITIES
Long-term borrowings		17	10,527,367	4,250,000
TOTAL LIABILITIES			18,150,320	8,856,426
NET ASSETS			9,815,931	10,623,826
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
Share capital		18	2,106,744	2,106,744
Share premium		19	7,965,381	7,965,381
Retained earnings		19	(256,194)	551,701
TOTAL EQUITY			9,815,931	10,623,826

Notes 1-29 form part of these financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2008

		Attributable to equity holders of the parent
		Share	Share	Retained	Total
		capital	Premium	earnings	equity
		£	£	£	£
Equity at 1 April 2006		2,106,744	7,975,680	188,868	10,271,292
Profit for the year		-	-	299,790	299,790
Share-based payments		-	-	63,043	63,043
Net income/expense recognised directly in equity		2,106,744	7,975,680	551,701	10,634,125
Cost of shares issued		-	(10,299)	-	(10,299)
Equity at 31 March 2007		2,106,744	7,965,381	551,701	10,623,826
Loss for the year		-	-	(842,743)	(842,743)
Share-based payments		-	-	34,848	34,848
Net income/expense recognised directly in equity		2,106,744	7,965,381	(256,194)	9,815,931
Equity at 31 March 2008		2,106,744	7,965,381	(256,194)	9,815,931

Notes 1-29 form part of these financial statements.

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 March 2008

			2008	2007
			£	£
Cash flows from operating activities
(Loss)/profit before income tax			(738,011)	789,329
Depreciation and amortisation			1,988,522	1,388,077
Loss on sale of property, plant and equipment			-	1,118
Profit held in trust			(31,049)	-
Share based payments			34,848	63,043
Net finance costs			644,148	312,433
Operating cash flows before movements in working capital			1,898,458	2,554,000
Decrease/(increase) in trade and other receivables			78,736	(74,967)
(Decrease)/increase in trade and other payables			(138,157)	291,865
Cash generated from operations			1,839,037	2,770,898
Income taxes paid			(709,342)	-
Net cash from operating activities			1,129,695	2,770,898
Cash flows from investing activities
Interest received			3,951	8,708
Interest paid			(664,725)	(251,647)
Acquisition of subsidiary, net of cash acquired			(5,144,295)	-
Purchase of intangible assets			(2,008,980)	(5,872,578)
Purchase of property, plant and equipment			(196,322)	(134,685)
Net cash used in investing activities			(8,010,371)	(6,250,202)
Cash flows from financing activities
Expenses paid in connection with share issue			-	(10,299)
Repayment of finance leases			(4,300)	-
Repayment of borrowings			(1,500,307)	-
Increase of bank loan			7,200,000	4,250,000
Net cash from financing activities			5,695,393	4,239,701
Net (decrease)/increase in cash and cash equivalents			(1,185,283)	760,397
Cash and cash equivalents at beginning of year			1,340,213	579,816
Cash and cash equivalents at end of year			154,930	1,340,213

Cash and cash equivalents :
Cash at bank and in hand			154,930	1,340,213
Bank overdrafts			-	-
Cash and cash equivalents			154,930	1,340,213

Notes 1-29 form part of these financial statements.

COMPANY CASH FLOW STATEMENT

For the year ended 31 March 2008

			2008	2007
			£	£
Cash flows from operating activities
(Loss)/profit before income tax			(738,011)	789,329
Depreciation and amortisation			1,988,522	1,388,077
Loss on sale of property, plant and equipment			-	1,118
Profit held in trust			(31,049)	-
Share based payments			34,848	63,043
Net finance costs			644,148	312,433
Operating cash flows before movements in working capital			1,898,458	2,554,000
Decrease/(increase) in trade and other receivables			78,736	(74,967)
(Decrease)/increase in trade and other payables			(138,157)	291,865
Cash generated from operations			1,839,037	2,770,898
Income taxes paid			(709,342)	-
Net cash from operating activities			1,129,695	2,770,898
Cash flows from investing activities
Interest received			3,951	8,708
Interest paid			(664,725)	(251,647)
Acquisition of subsidiary, net of cash acquired			(5,144,295)	-
Purchase of intangible assets			(2,008,980)	(5,872,578)
Purchase of property, plant and equipment			(196,322)	(134,685)
Net cash used in investing activities			(8,010,371)	(6,250,202)
Cash flows from financing activities
Expenses paid in connection with share issue			-	(10,299)
Repayment of finance leases			(4,300)	-
Repayment of borrowings			(1,500,307)	-
Increase of bank loan			7,200,000	4,250,000
Net cash from financing activities			5,695,393	4,239,701
Net (decrease)/increase in cash and cash equivalents			(1,185,283)	760,397
Cash and cash equivalents at beginning of year			1,340,213	579,816
Cash and cash equivalents at end of year			154,930	1,340,213

Cash and cash equivalents :
Cash at bank and in hand			154,930	1,340,213
Bank overdrafts			-	-
Cash and cash equivalents			154,930	1,340,213

Notes 1-29 form part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS AND GENERAL INFORMATION

AdEPT Telecom plc is a leading independent provider of telecommunications services with award winning customer service. The Group is focused on delivering a complete telecommunications service for small and medium sized business customers with a targeted product range including landline calls, line rental, broadband, mobile and other services.

AdEPT Telecom plc is the Group's ultimate parent company and is incorporated and domiciled in the UK. The Company's shares are listed on the Alternative Investment Market (AIM) of the London Stock Exchange.

The Group's statutory financial statements for the year ended 31 March 2007, prepared under UK GAAP, have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985.

2. ACCOUNTING POLICIES

2.1 Basis of preparation of financial statements

The consolidated financial statements have been prepared in accordance with applicable International Financial Reporting Standards (IFRS) as adopted by the EU as issued by the International Accounting Standards Board and in particular IFRS 1, First Time Adoption of International Financial Reporting Standards as these are the Group's first annual financial statements prepared under the application of IFRS.

The policies have changed from the previous year when the financial statements were prepared under applicable United Kingdom Generally Accepted Accounting Principles (UK GAAP). The comparative information has been restated in accordance with IFRS and the changes to accounting policies are explained in note 29, together with the reconciliation of opening balances. The date of transition to IFRS was 1 April 2006 (transition date).

The accounting policies that have been applied in the opening balance sheet have also been applied throughout all periods presented in these financial statements.

The company has taken advantage of s230 CA 1985 to not present a company income statement. The (loss)/profit for the year dealt with in the holding company, which has been approved by the Board, was £(842,743) (2007: £507,375).

The following IFRS standards, amendments and interpretations are effective for the Company from 1 January 2008 and hence have not been adopted within these financial statements. The adoption of these standards, amendments and interpretations is not expected to have a material impact on the Company's profit for the year or equity:

IFRS 7 Financial Instruments: Disclosures 

IFRS 4: Insurance Contracts -Revised implementation guidance

IFRIC Interpretation 11: IFRS 2 -Group and Treasury Share Transactions

IFRIC Interpretation 12: Service Concession Arrangements

IFRIC Interpretation 14: IAS 19 -The limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

IFRIC Interpretation 13: Customer Loyalty Programmes

IFRS 8: Operating Segments

IAS 23 Borrowing Costs (revised)

IAS 1 Presentation of Financial Statements (revised 2007)

Amendment to IFRS 2: Share-based Payment -Vesting conditions and cancellations

IAS 27 Consolidated and Separate Financial Statements

IFRS 3 Business Combinations

2.2 Basis of consolidation

The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 31 March 2008. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights.

Unrealised gains on transactions between the Company and its subsidiaries are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Acquisitions of subsidiaries are dealt with by the purchase method. The purchase method involves the recognition at fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated balance sheet at their fair values, which are also used as the bases for subsequent measurement in accordance with the Group's accounting policies. Goodwill is stated after separating out identifiable intangible assets. Goodwill represents the excess of acquisition cost over the fair value of the Group's share of the identifiable net assets (including intangibles) of the acquired subsidiary at the date of acquisition.

2.3 Revenue

Revenue is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied and services provided, excluding VAT and trade discounts. Revenue is recognised upon the performance of services or transfer of the risks and rewards of ownership to the customer.

Revenue comprises of both invoiced and un-invoiced amounts for performance of network services supplied by the Group during the year. The network services, which include call revenues (billing for call minutes) and fixed charges such as line rental or broadband, are generally billed monthly in arrears. The revenue is recognised in the month to which the calls relate. Revenue from mobile commissions is recognised when the customers are connected to the relevant network.

2.4 Investments

Shares in the Subsidiaries are valued at cost less provision for permanent impairment.

2.5 Intangible fixed assets acquired as part of a business combination and amortisation

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 market expectations about the probability that the future economic benefits embodied in the asset will flow to the Group.

Intangible fixed assets continue to be subject to an impairment review on the first anniversary after acquisition, when appropriate lives are selected.

The intangible asset "customer base" is amortised to the income statement over its estimated economic life. The average useful economic life of all the customer bases has been estimated at 12 years (2007: 11 years).

2.6 Other intangible assets

Also included within intangible fixed assets are the development costs of the Group's billing and customer management system plus an individual license. These other intangible assets are stated at cost, less amortisation and any provision for impairment. Amortisation is provided at rates calculated to write off the cost, less estimated residual value of each intangible asset, over its expected useful life on the following bases:

Customer management system	-	3 years straight line
Other licences	-	Contract license period

2.7 Property, plant and equipment and depreciation

Property plant and equipment are stated at cost, less depreciation and any provision for impairment. Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost, less estimated residual value of each asset, over its expected useful life on the following bases:

			Short term leasehold improvements	-	5 years straight line
			Fixtures and fittings	-	3 years straight line
			Office equipment	-	3 years straight line
			Computer software	-	3 years straight line

2.8 Leasing and hire purchase commitments

Assets held under finance leases and hire purchase contracts, which are those where substantially all the risks and rewards of ownership of the asset have passed to the company, are capitalised in the balance sheet and depreciated over their useful lives. The corresponding lease or hire purchase obligation is treated in the balance sheet as a liability.

The interest element of the rental obligations is charged to the income statement over the period of the lease and represents a constant proportion of the balance of capital repayments outstanding.

Rentals under operating leases, where substantially all of the benefits and risks of ownership remain with the lessor, are charged to the profit and loss on a straight line basis, even if payments are not made on such a basis.

2.9 Pensions

The group contributes to personal pension plans. The amount charged to the income statement in respect of pension costs is the contribution payable in the year.

2.10 Capital instruments

The costs incurred directly in connection with the issue of debt instruments are charged to the income statement on a straight line basis over the life of the debt instrument.

2.11 Income tax

Income tax is the tax currently payable based on taxable profit for the year.

Deferred income tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred income tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit.

The hive up of intangible assets between Group companies is not considered a business combination under IFRS 3 (Business Combinations) and therefore deferred income tax is not provided on the intangible customer base asset thus acquired by AdEPT Telecom plc.

Deferred income 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 reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred income tax assets.

Deferred income tax liabilities are provided in full, with no discounting. Deferred income tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred income tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date. 

Changes in deferred income tax assets or liabilities are recognised as a component of income 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 income tax is also charged or credited directly to equity.

2.12 Share based payments

The cost of equity-settled transactions with employees is measured by reference to the fair value of the award at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date at which the relevant employees become fully entitled to the award. Fair value is appraised at the grant date and excludes the impact on non-market vesting conditions such as profitability and sales growth targets, using an appropriate pricing model for which the assumptions are approved by the Directors. In valuing equity-settled transactions, only vesting conditions linked to the market price of the shares of the Company are considered.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied.

At each balance sheet date, the cumulative expense (as above) is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non market conditions, the number of equity instruments that will ultimately vest or in the case of an instrument subject to a market condition, be treated as vesting described above. The movement in the cumulative expense since the previous balance sheet date is recognised in the income statement, with a corresponding entry in equity.

2.13 Cash and cash equivalents

Cash and cash equivalents comprise cash on 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.

2.14 Financial risk management objectives and policies

The Group's principal financial liabilities comprise bank loans, overdrafts, finance leases, trade payables and hire purchase contracts. The main purpose of these financial liabilities is to finance the Group's operations and acquisitions. The Group has various financial assets such as trade receivables and cash, which arise directly from its operations.

The Group also enters into interest rate swaps. The purpose is to manage the interest rate risks arising from the Group's sources of finance.

It is, and has been throughout 2007 and 2008, the Group's policy that no trading in derivatives shall be undertaken.

The main risks arising from the Group's financial instruments are cash flow interest rate risk, liquidity risk and credit risk. The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below.

Interest rate risk

The Group's exposure to the risk of changes in market interest rates relates primarily to the Group's long-term debt obligations with floating interest rates.

The Group's policy is to manage its interest cost using a mix of fixed and variable rate debts. The Group's policy is to keep 75% of its borrowings at fixed rates of interest. To manage this, the Group enters into interest rate swaps, in which the Group agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed upon notional principal amount. These swaps are designated to hedge underlying debt obligations. At 31 March 2008, after taking into account the effect of interest rate swaps, 75% of the Group's borrowings are at a fixed rate of interest (2007: £Nil).

Credit risk

The Group's policy is to monitor trade and other receivables and avoid significant concentrations of credit risk. The principal credit risk arises from trade receivables. Aged receivables reports are reviewed regularly and significant items brought to the attention of senior management. 

Liquidity risk

The Group seeks to manage liquidity risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably.

The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans and finance lease contracts. 11.6% of the Group's borrowings will mature in less than one year at 31 March 2008 (2007: Nil) based on the carrying value of borrowings reflected in the financial statements.

Currency risk

AdEPT's operations are handled entirely in sterling.

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The group makes certain estimates and assumptions regarding the future. 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. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

The estimated life of intangible asset customer bases:

Intangible asset customer bases are amortised over their useful lives. They are subject to an impairment review on the first anniversary after acquisition, when appropriate lives are selected. Useful lives are based on the management's estimates of the period that assets will generate revenue. Changes to estimates could result in significant variations in the carrying value and amounts charged to the consolidated income statement in specified periods. More details including carrying values are included in note 11.

The estimated liability of the deferred consideration of intangible asset customer bases:

The estimate of the deferred consideration liability is based upon the revenue and margins that are expected to be generated by the customer base under the terms of each Sale and Purchase agreement. Actual revenue may be materially different to that estimated and could result in significant variations in the carrying value of the intangible asset customer bases and deferred consideration liabilities and respective amounts charged to the consolidated income statement in specified periods. Details of the deferred consideration carrying values are included in note 16.

4. REVENUE

The whole of the revenue is attributable to the provision of voice telephone services to both residential and business customers. The directors regard the group as having a single business segment. All revenue arose within the United Kingdom.

5. OPERATING (LOSS)/PROFIT

The operating (loss)/profit is stated after charging:

				As restated
			2008	2007
			£	£
Amortisation of customer base and license			1,869,488	1,325,229
Depreciation of tangible fixed assets:
	- owned by the group		119,034	62,848
Loss on disposal of tangible fixed assets			-	1,118
Rentals under operating leases		- land and buildings	341,528	108,037
		- motor vehicles and other equipment	102,331	4,033

The operating loss includes non-recurring costs of £1,481,827 (2007: Nil), incurred by the Telecom Direct division, which will not recur next year. The bulk of these costs are represented by staff, property and leases, which when stripped out leave the underlying administrative costs for the business. Included within this figure, is amortisation of £100,889, relating to the billing system for that division.

6. AUDITORS' REMUNERATION

				2008		2007
				£		£
		Fees payable to the company's auditor for the audit
		of the company's annual financial statements		31,200		30,000
		Fees payable to the company's auditor and its associates
		in respect of :
		Other services relating to taxation		5,100		5,500
		Services relating to corporate finance transactions		20,000		20,000
		All other services		13,865		31,010

7. FINANCE COSTS

						2008		2007
						£		£
				On bank loans and overdrafts		563,093		250,997
				Bank fees		78,286		61,668
				Finance leases		766		-
				Other interest payable		10,402		8,476
						652,547		321,141

8. EMPLOYEE COSTS 

Staff costs, including directors' remuneration, were as follows:

			2008	2007
			£	£
		Wages and salaries	2,835,078	1,697,112
		Social security costs	278,931	181,698
		Other pension costs	15,889	15,094
			3,129,898	1,893,904

Employee costs includes £810,796 non-recurring costs (note 5) (2007:Nil).

The average monthly number of employees, including the directors, during the year was as follows:

			2008	2007
			No.	No.
		Nonߛexecutive directors	4	4
		Administrative staff	65	36
			69	40

Key personnel : 

The directors are considered to be the key management personnel of the company, having authority and responsibility for planning, directing and controlling the activities of the Group.

9. DIRECTORS' EMOLUMENTS

			2008	2007
			£	£
		Emoluments	794,047	755,943
		Group pension contributions to money purchase pension schemes	15,889	15,094

During the year retirement benefits were accruing to 1 director (2007:1) in respect of money purchase pension schemes. The highest paid director received remuneration of £207,050 (2006: £262,563).

The value of the group's contributions paid to a money purchase pension scheme in respect of the highest paid director amounted to £15,889 (2007: £15,094). Details regarding the share options of the directors who held office at 31 March 2008 in AdEPT are disclosed in note 18 to the financial statements.

10. INCOME TAX EXPENSE

						2008		2007
						£		£
				Current tax (see note below)
				UK corporation tax charge on profits for the year		64,951		444,564
				Adjustments in respect of prior periods		-		22,636
				Total current tax		64,951		467,200
				Deferred tax
				Origination and reversal of timing differences		39,781		(13,516)
				Adjustments in respect of prior periods		-		35,855
				Total deferred tax (see note 13)		39,781		22,339
				Total income tax expense		104,732		489,539

Factors affecting tax charge for year

The relationship between expected tax expense based on the effective tax rate of AdEPT at 30% (2007: 30%) and the tax expense actually recognised in the income statement can be reconciled as follows:

						2008		2007
						£		£
				(Loss)/profit before income tax		(738,011)		789,329
				Tax rate		30%		30%
				Expected tax expense		(221,403)		236,799
				Expenses not deductible for tax purposes		31,652		28,344
				Amortisation not deductible for tax purposes		302,747		191,152
				Depreciation for period in excess of capital allowances		-		(4,369)
				Movement in general provisions		-		(6,906)
				Adjustments to tax charge in respect of prior periods		-		22,636
				Marginal relief		(8,264)		(456)
				Other timing differences		-		22,339
				Actual tax expense net (see note above)		104,732		489,539

There were no material factors that may affect future tax charges.

11. INTANGIBLE FIXED ASSETS

						Computer		Customer base base
				License		software		base		Total
		Group and company		£		£		£		£
		Cost
		At 1 April 2006		23,400		249,181		12,709,068		12,981,649
		Additions		-		208,648		4,254,192		4,462,840
		Retrospective adjustment		(1,093)		-		207,407		206,314
		At 1 April 2007		22,307		457,829		17,170,667		17,650,803
		Additions		3,904		204,124		9,425,433		9,633,461
		Addition from subsidiary		-		96,218		-		96,218
		Disposals		-		(96,218)		-		(96,218)
		At 31 March 2008		26,211		661,953		26,596,100		27,284,264
		Amortisation
		At 1 April 2006		1,170		113,263		1,557,123		1,671,556
		Charge for the year		2,329		112,985		1,209,915		1,325,229
		At 1 April 2007		3,499		226,248		2,767,038		2,996,785
		Charge for the year		2,376		241,267		1,625,845		1,869,488
		Disposals		-		(96,218)		-		(96,218)
		At 31 March 2008		5,875		371,297		4,392,883		4,770,055
		Net book value
		At 31 March 2008		20,336		290,656		22,203,217		22,514,209
		At 31 March 2007		18,808		231,581		14,403,629		14,654,018

A retrospective adjustment was made during the year ended 31 March 2007 in relation to the fair value of the consideration paid for prior year acquisitions.

The Group acquired a billing system during the year ended 31 March 2008 by way of a hive up of assets from a subsidiary, with a net book value of £96,218 at the date of hive up. The billing system was required to maintain continuity of the billing cycle during the transitional period. Following the transition of the acquired customer base to the AdEPT billing platform the hived up billing system was disposed of.

12. PROPERTY, PLANT AND EQUIPMENT

				Short term
				leasehold		Fixtures		Office
				improvements		and fittings		equipment		Total
		Group and company		£		£		£		£
		Cost
		At 1 April 2006		7,117		39,046		165,091		211,254
		Additions		-		8,153		126,532		134,685
		Disposals		-		-		(3,017)		(3,017)
		At 1 April 2007		7,117		47,199		288,606		342,922
		Additions		-		72,652		123,670		196,322
		Addition from subsidiary		-		1,730		42,724		44,454
		Disposals		-		-		-		-
		At 31 March 2008		7,117		121,581		455,000		583,698
		Depreciation
		At 1 April 2006		4,033		24,322		95,240		123,595
		Charge for the year		1,423		10,898		50,527		62,848
		Disposals		-		-		(1,898)		(1,898)
		At 1 April 2007		5,456		35,220		143,869		184,545
		Charge for the year		1,424		18,545		99,065		119,034
		Disposals		-		-		-		-
		At 31 March 2008		6,880		53,765		242,934		303,579
		Net book value
		At 31 March 2008		237		67,816		212,066		280,119
		At 31 March 2007		1,661		11,979		144,737		158,377

The Group acquired tangible fixed assets during the year ended 31 March 2008 by way of a hive up of assets from a subsidiary, with a net book value of £44,454 at the date of hive up. These assets are in continuing use within the business.

13. DEFERRED TAXATION

					2008		2007
					£		£
		At 1 April 2007			17,563		39,902
		Income Statement charge			(39,781)		(22,339)
		Acquired with subsidiary			735,311		-
		At 31 March 2008			713,093		17,563
					2008		2007
					£		£
		Capital allowances			77,78,820		(7,228)
		Tax losses			621,320		-
		Other timing differences			13,953		24,791
					713,093		17,563

 The deferred tax asset is made up as follows:

14. FIXED ASSET INVESTMENTS

Shares in group undertakings

						Total
						£
				Cost or valuation
				At 1 April 2006 and 1 April 2007		7,198,326
				Additions (note 23)		5,630,930
				31 March 2008		12,829,256
				Amounts written off
				At 1 April 2006 and 1 April 2007		7,198,326
				Amounts written off during the year		5,630,930
				31 March 2008		12,829,256
				Net book value
				At 31 March 2008		-
				At 31 March 2007		-

Details of the principal Subsidiaries are disclosed in note 24 to the financial statements.

15. TRADE AND OTHER RECEIVABLES

				Group				Company
				2008		2007		2008		2007
				£		£		£		£
		Trade receivables		3,420,075		2,921,054		3,420,075		2,921,054
		Other receivables		8,983		14,807		8,983		14,807
		Prepayments and accrued income		874,842		374,220		874,842		374,220
				4,303,900		3,310,081		4,303,900		3,310,081

Included within prepayments are deferred finance costs of £196,811 (2007: £115,097) in relation to the issue of debt instruments.

16. TRADE AND OTHER PAYABLES

				Group				Company
				2008		2007		2008		2007
				£		£		£		£
		Trade payables		3,700,956		2,571,324		3,700,956		2,571,324
		Amounts owed to group undertakings		-		-		-		88,536
		Other taxes and social security costs		503,172		323,183		503,172		323,183
		Finance lease obligations		15,607		-		15,607		-
		Other payables		143,570		17,315		143,570		17,315
		Accruals and deferred income		2,233,754		940,699		2,233,754		940,699
				6,597,059		3,852,521		6,597,059		3,941,057

The finance lease obligations are payable within one year and have a present value of £15,607. Included within accruals is deferred consideration of £619,044 (2007: £306,545) in respect of the customer bases and subsidiaries acquired in the current and prior years.

17. LONG TERM BORROWINGS

								2008		2007
								£		£
		Between 1 and 2 years						1,711,933		-
		Between 2 and 3 years						1,711,934		-
		More than 3 years						7,103,500		4,250,000
		Bank loans						10,527,367		4,250,000

The bank loan is secured by a debenture incorporating a fixed and floating charge over the undertaking and all property and assets present and future including goodwill, book debts, uncalled capital, buildings, fixtures, fixed plant and machinery. The loan bears interest at 2% above the bank's base rate.

18. SHARE CAPITAL

			2008	2007
			£	£
		Authorised
		65,000,000 Ordinary shares of 10p each	6,500,000	6,500,000
		Allotted, called up and fully paid
		21,067,443 Ordinary shares of 10p each	2,106,744	2,106,744

Share OptionsAt 31 March 2008, the following options and warrants over the shares of AdEPT were in issue:

				2008		2008		2007		2007
				Number of shares under option		Weighted average exercise price		Number of shares under option		Weighted average exercise price
		Outstanding at 1 April		2,378,420		£0.77		2,375,047		£0.77
		Granted during the year		-		-		16,168		£1.99
		Forfeited during the year		(65,374)		£1.45		(12,795)		£1.65
		Exercised during the year		-		-		-		-
		Outstanding at 31 March		2,313,046		£0.75		2,378,420		£0.77

The fair values have been determined using the Black Scholes-Merton Pricing Model and the weighted average fair value of these options at the measurement date is £0.06 per option. Expected volatility at 20%, was determined by reviewing the historical fluctuations in the share price since the company's admission to AIM. Expected dividend yield is estimated at 0%, this estimate of nil is per the requirement of IFRS2 where a company such as AdEPT has no current dividend history, it does not bear any relation to the actual dividend policy of AdEPT Telecom PLC. The risk free interest rate is estimated at 4.8%.

18. SHARE CAPITAL (CONTINUED)

		Name		Share option scheme		Number of ordinary shares subject to options		Date of grant		Share  price at grant date		Exercise price per share		Expected Option life (years)
		Directors
		Ian Fishwick		Unapproved		152,160		31/07/03		£0.29		£0.29		5.7
		Ian Fishwick		EMI		300,000		28/12/03		£0.29		£0.29		5.3
		Ian Fishwick		EMI		300,000		28/12/03		£0.29		£0.29		5.3
		Chris Riggs		EMI		85,548		29/08/04		£0.42		£0.42		4.6
		Chris Riggs		EMI		85,560		29/08/04		£0.42		£0.42		4.6
		Chris Riggs		EMI		85,548		06/06/05		£0.42		£0.42		4.8
		Chris Riggs		EMI		85,560		06/06/05		£0.42		£0.42		3.8
		Amanda Woodruffe		EMI		85,548		29/08/04		£0.42		£0.42		4.6
		Amanda Woodruffe		EMI		85,560		29/08/04		£0.42		£0.42		4.6
		Amanda Woodruffe		EMI		85,548		06/06/05		£0.42		£0.42		4.8
		Amanda Woodruffe		EMI		85,560		06/06/05		£0.42		£0.42		3.8
		Tim Holland		EMI		71,428		13/12/05		£1.40		£1.40		2.3
		Tim Holland		Unapproved		99,680		13/12/05		£1.40		£1.40		3.1
		Tim Holland		Unapproved		171,108		13/12/05		£1.40		£1.40		4.1
		Others
		Employees		EMI		53,680		15/02/06		£1.40		£1.40		1.25
		Employees		EMI		53,681		15/02/06		£1.40		£1.40		2.25
		Employees		EMI		2,764		09/05/06		£1.99		£1.99		1.25
		Employees		EMI		2,764		09/05/06		£1.99		£1.99		2.25
		Strand Partners Limited		Warrants		316,012		14/02/06		£1.40		£1.40		4.1
		Landsbanki Securities (UK) Limited		Warrants		105,337		14/02/06		£1.40		£1.40		3.1

The midߛmarket price of the ordinary shares on 31 March 2008 was 44.5p and the range during the year was 36.5p to 82.5p. 

19. RESERVES

				Share
				premium		Profit and
		Group		account		loss account
				£		£
		At 1 April 2006		7,975,680		188,868
		Profit retained for the year		-		299,790
		Additional expense in connection with previous share options		(10,299)		-
		Share options issued during the year		-		63,043
		At 1 April 2007		7,965,381		551,701
		Loss for the year		-		(842,743)
		Share options issued during the year		-		34,848
		At 31 March 2008		7,965,381		(256,194)

				Share
				premium		Profit and
		Company		account		loss account
				£		£
		At 1 April 2006		7,975,680		(18,717)
		Profit retained for the year		-		507,375
		Additional expense in connection with previous share options		(10,299)		-
		Share options issued during the year		-		63,043
		At 1 April 2007		7,965,381		551,701
		Loss for the year		-		(842,743)
		Share options issued during the year		-		34,848
		At 31 March 2008		7,965,381		(256,194)

20. PENSION COMMITMENTS

At 31 March 2008 there were no pension commitments (2007: £Nil).

21. OPERATING LEASE COMMITMENTS

At 31 March 2008 the group and company had lease commitments as follows:

						Land and buildings				Other
						2008		2007		2008		2007
				Group and company		£		£		£		£
				Within 1 year		331,234		72,280		87,408		4,386
				Between 2 and 5 years		611,826		-		28,569		2,924
				More than 5 years		25,493		-		-		-

Land and Buildings :

The group leases its offices under non cancellable operating lease agreements. There is no material contingent rent payable. The lease agreements do not offer security of tenure. The lease terms are for approximately 5 years, the Abingdon office lease agreement has an option to terminate the lease subject to a 6 month notice period.

Other :

The Group leases various office equipment and motor vehicles under non cancellable operating lease agreements. The lease terms are either 2 or 3 years.

The lease expenditure charged to the income statement during the year is disclosed in note 5.

22. RELATED PARTY TRANSACTIONS

There were no related party transactions during the year.

23. ACQUISITIONS

In June 2007 AdEPT acquired a customer base from Fizz Telecom limited comprising 5,000 business customers. The fair value tables in respect of this acquisition can be summarised as follows:

				Purchase consideration :				£
				Initial cash paid				1,028,875
				Acquisition costs				55,218
				Deferred consideration				660,514
				Fair value of net assets acquired				-
				Customer base acquired				1,744,607

In December 2007, AdEPT acquired 100% of the share capital of Oxtalk Limited and its subsidiary Telecom Direct Limited, both companies are registered in England and Wales.

						Book value		Fair value adjustments		Fair value
						£		£		£
				Assets
				Non-current assets
				Intangible assets		441,407		(296,318)		145,089
				Property, plant and equipment		413,613		(369,159)		44,454
				Deferred income tax		212,343		529,218		741,561
						1,067,363		(136,259)		931,104
				Current assets
				Trade and other receivables		2,739,695		(1,748,854)		990,841
				Cash and cash equivalents		-		-		-
						2,739,695		(1,748,854)		990,841
				Total assets		3,807,058		(1,885,113)		1,921,945
				Current liabilities
				Trade and other payables		(2,025,536)		(437,530)		(2,463,066)
				Short term borrowings		(1,500,307)		-		(1,500,307)
						(3,525,843)		(437,530)		(3,963,373)
				Total liabilities		(3,525,843)		(437,530)		(3,963,373)
				Net assets/(liabilities)		281,215		(2,322,643)		(2,041,428)

		Purchase consideration :		£
		Cash paid		4,819,000
		Acquisition costs		371,635
		Deferred consideration		440,295
		Purchase consideration		5,630,930
		Fair value of net liabilities acquired		2,041,428
		Customer base acquired		7,672,358

24. PRINCIPAL SUBSIDIARIES

		Company name		Country		Percentage Shareholding of Ordinary shares		Description
		Transglobal Telecommunications Limited		England & Wales		100		Non trading
		Connaught Telecommunications Limited		England & Wales		100		Non trading
		Call Options UK Limited		England & Wales		100		Non trading
		Adept Managed Networks Limited		England & Wales		100		Non trading
		Connectacom Network Solutions Limited		England & Wales		100		Non trading
		Oxtalk Limited		England & Wales		100		Non trading
		Telecom Direct Limited		England & Wales		100		Non trading

The business and assets of Subsidiaries are hived up to AdEPT immediately or within one month following acquisition. After the hive up, the Subsidiaries become inactive. With effect from April 2008 all of the above Subsidiaries, with the exception of Oxtalk Limited and Telecom Direct Limited (both non-trading), are in the process of being taken through a member's voluntary liquidation.

25. CAPITAL COMMITMENTS

At 31 March 2008 there were capital commitments of £23,188 (2007: £4,042). 

26. ANALYSIS OF ACQUISITIONS DURING THE YEAR

During the year the group made two acquisitions (2007: 2). Following acquisition the customers are fully integrated into a single billing and customer service platform. Whilst revenue can be separately identified by acquisition, cost of sales cannot. Calls are routed across various network suppliers and the overhead base services all of our customers. The analysis of revenue by existing and acquired businesses is, therefore, as follows:

							31 March		31 March
							2008		2007
							£		£
					Sales Revenue
					Existing businesses as at 31 March 2007		16,437,242		14,911,072
					Businesses acquired in the year		7,180,604		3,915,935
					Total sales revenue		23,617,846		18,827,007

27. EARNINGS PER SHARE

Earnings per share is calculated on the basis of a loss of £842,743 (2007: profit £299,790) divided by the weighted average number of shares in issue for the year of 21,067,443 (2007: 21,067,443). The diluted earnings per share is calculated on the assumption that the unapproved and EMI share options as disclosed in note 18 to the financial statements are exercised. This would give rise to a total weighted average number of ordinary shares in issue for the period of 22,959,140 (2007: 23,024,513).

A more realistic representation of earnings per share is to add back amortisation of intangible assets and non-recurring costs to retained earnings, giving £2,407,683 (2007: £1,625,019). This is divided by the same weighted average number of shares as above.

			2008	2007
			£	£
	Earnings for the purposes of basic and diluted earnings per share
	(Loss)/profit for the period attributable to equity holders of the parent		(842,743)	299,790
	Amortisation		1,869,488	1,325,229
	Non-recurring costs		1,380,938	-
	Adjusted profit attributable to equity holders of the parent, adding back amortisation and non-recurring costs		2,407,683	1,625,019
	Number of shares
	Weighted average number of shares used for earnings per share		21,067,443	21,067,443
	Dilutive effect of share plans		1,891,697	1,957,070
	Diluted weighted average number of shares used to calculate fully diluted earnings per share		22,959,140	23,024,513
	Earnings per share
	Basic earnings per share (pence)		(4.00)p	1.42p
	Fully diluted earnings per share (pence)		n/a	1.30p
	Adjusted earnings per share, after adding back amortisation and non-recurring costs
	Adjusted basic earnings per share (pence)		11.43p	7.71p
	Adjusted fully diluted earnings per share (pence)		10.49p	7.06p

Earnings per share is calculated by dividing the retained earnings attributable to equity holders of the parent by the weighted average number of ordinary shares in issue.

Adjusted earnings per share is calculated by dividing the retained earnings attributable to equity holders of the parent (after adding back amortisation and non-recurring costs) by the weighted average number of ordinary shares in issue.

The adjustment for the dilutive effect of share options in the year to 31 March 08 has not been reflected in the calculation of the diluted loss per share as the effect would be anti-dilutive.

28. FINANCIAL INSTRUMENTS

Set out below is the fair carrying amounts of the Group's financial instruments in the financial statements. The directors consider there to be no difference between the carrying value and fair value of the Group's financial instruments.

Group and company	2008	2007
	£	£
Financial assets
Cash	154,930	1,340,213
Financial liabilities
Interest bearing loans and borrowings:
Obligations under finance lease contracts	15,607	-
Floating rate borrowings	2,862,500	4,250,000
Fixed rate borrowings	8,587,500	-
Other financial liabilities	619,044	306,545
	12,084,651	4,556,545
Amounts due for settlement:
Within 12 months	1,951,934	306,545
After 12 months	10,132,717	4,250,000
	12,084,651	4,556,545

The Facility A term loan bears interest at 2% over LIBOR and is repayable by quarterly instalments of £394,650. The final repayment is due on 31 December 2011. At the year end the amount outstanding in respect of this facility was £5.25m.

The Facility B term loan bears interest at 2% over LIBOR and is repayable in 12 quarterly instalments based on the amount drawn. At the year end the amount outstanding in respect of this facility was £400,000. At 31 March 2008 the undrawn committed facility available in respect of which all conditions precedent had been met at that date were £2.1m (2007: £1.75m).

The Facility C revolving credit facility bears interest at a rate at 2.0% over LIBOR. At the year end the amount outstanding in respect of the revolving credit facility was £5.25m.

At 31 March 2008 the Group had outstanding earnout liabilities amounting to £619,044 (2007: £396,545). No interest is charged on these liabilities. The weighted average period of financial liabilities on which no interest is paid is 12 months (2007: 12 months).

The fixed interest rate liabilities relate to amounts payable on finance lease liabilities. The weighted average interest rate of these liabilities was 8.0% and the weighted average period for which the interest rates are fixed was 60 months.

The financial assets of the Group are surplus funds, which are offset against borrowings under the facility, and there is no separate interest rate exposure.

Barclays Bank plc has a debenture incorporating a fixed and floating charge over the undertaking and all property and assets present and future including goodwill, book debts, uncalled capital, buildings, fixtures, fixed plant and machinery.

Obligations under finance leases

	Minimum Lease payments		Present Value of Minimum Lease payments
	2008	2007	2008	2007
	£	£	£	£
Amounts payable under finance leases
Within one year	17,200	-	15,607	-
Less Future Finance charges	(1,593)	-	-	-
Present Value of lease obligations	15,607	-	-	-
Less amounts due for settlement within 12 months			(15,607)	-
Amounts due for settlement after 12 months			-	-

The Group has a certain amount of its property, plant and equipment under finance lease. For the year ended 31 March 2008 the average effective borrowing rate was 8.0%. Interest rates are fixed at the contract dates. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. All lease obligations are denominated in sterling. Finance lease liabilities are secured upon the underlying assets. Outstanding finance lease obligations at 31 March 2008 are due to be settled within 12 months. The fair value of the Group's lease obligations approximates to their carrying amount.

29. EXPLANATION OF TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS

As stated in the Basis of Preparation, these are the Group's first consolidated annual financial statements prepared in accordance with IFRS.

An explanation of how the transition from UK GAAP to IFRS has affected the Group's financial position, financial performance and cash flows is set out below.

The transition to IFRS resulted in computer software being reclassified from tangible fixed assets to intangible fixed assets and the related depreciation expense reclassified to amortisation in the income statement. There have been no other changes to the financial statements as a result of the transition to IFRS.

						Year ended 31 March 2007
							Effect of
						Under UK	Transition	Under
						GAAP	to IFRS	IFRS
						£	£	£
REVENUE						18,827,007	-	18,827,007
Cost of sales						(11,535,949)	-	(11,535,949)
GROSS PROFIT						7,291,058	-	7,291,058
Administration expenses						(4,801,219)	-	(4,801,219)
EARNINGS BEFORE INTEREST TAXATION DEPRECIATION AND AMORTISATION						2,489,839	-	2,489,839
Depreciation						(175,833)	112,985	(62,848)
Amortisation of intangible fixed assets						(1,212,244)	(112,985)	(1,325,229)
OPERATING PROFIT						1,101,762	-	1,101,762
Finance costs						(321,141)	-	(321,141)
Finance income						8,708	-	8,708
PROFIT BEFORE INCOME TAX						789,329	-	789,329
Income tax expense						(489,539)	-	(489,539)
PROFIT FOR THE PERIOD						299,790	-	299,790
Attributable to:
Equity holders of the parent						299,790	-	299,790
Basic earnings per share (pence)						1.42p	-	1.42p
Diluted earnings per share (pence)						1.30p	-	1.30p

	At 1 April 2006			At 31 March 2007
			Opening			Opening
	Under	Effect of	IFRS	Under	Effect of	IFRS
	UK	transition	Balance	UK	transition	Balance
	GAAP	to IFRS	Sheet	GAAP	to IFRS	Sheet
	£	£	£	£	£	£
NON-CURRENT ASSETS
Other intangible assets	11,174,175	135,918	11,310,093	14,422,437	231,581	14,654,018
Property, plant and equipment	223,577	(135,918)	87,659	389,958	(231,581)	158,377
Deferred income tax assets	39,902	-	39,902	17,563	-	17,563
	11,437,654	-	11,437,654	14,829,958	-	14,829,958
CURRENT ASSETS
Trade and other receivables	3,296,782	-	3,296,782	3,310,081	-	3,310,081
Cash and cash equivalents	579,816	-	579,816	1,340,213	-	1,340,213
	3,876,598	-	3,876,598	4,650,294	-	4,650,294
TOTAL ASSETS	15,314,252	-	15,314,252	19,480,252	-	19,480,252
CURRENT LIABILITIES
Trade and other payables	4,756,256	-	4,756,256	3,852,521	-	3,852,521
Income tax payable	286,704	-	286,704	753,905	-	753,905
	5,042,960	-	5,042,960	4,606,426	-	4,606,426
NON-CURRENT LIABILITIES
Borrowings	-	-	-	4,250,000	-	4,250,000
TOTAL LIABILITIES	5,042,960	-	5,042,960	8,856,426	-	8,856,426
NET ASSETS	10,271,292	-	10,271,292	10,623,826	-	10,623,826
CAPITAL AND RESERVES
Called-up share capital	2,106,744	-	2,106,744	2,106,744	-	2,106,744
Share premium account	7,975,680	-	7,975,680	7,965,381	-	7,965,381
Retained earnings	188,868	-	188,868	551,701	-	551,701
TOTAL EQUITY	10,271,292	-	10,271,292	10,623,826	-	10,623,826

					Year ended 31 March 2007
						Effect of
					Under UK	Transition	Under
					GAAP	to IFRS	IFRS
					£	£	£
Net cash from operating activities					2,770,898	-	2,770,898
Cash flows from investing activities
Interest received					8,708	-	8,708
Interest paid					(251,647)	-	(251,647)
Purchase of intangible assets					(5,663,930)	(208,648)	(5,872,578)
Purchase of property, plant and equipment					(343,333)	208,648	(134,685)
Net cash used in investing activities					(6,250,202)	-	(6,250,202)
Cash flows from financing activities
Expenses paid in connection with share issue					(10,299)	-	(10,299)
Increase of bank loan					4,250,000	-	4,250,000
Net cash (used in)/from financing activities					4,239,701	-	4,239,701
Net increase in cash and cash equivalents					760,397	-	760,397
Cash and cash equivalents at beginning of period/year					579,816	-	579,816
Cash and cash equivalents at end of period/year					1,340,213	-	1,340,213

There are no material adjustments to the total equity in any of the periods for these financial statements.

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