BDI.L Regulatory News (BDI)

10 Sep 2007 07:02

Bond International Software PLC10 September 2007 FOR IMMEDIATE RELEASE 10 September 2007 Bond International Software Plc UNAUDITED INTERIM RESULTS Bond International Software Plc, the specialist provider of software for theinternational recruitment and human resources industries, with operations in theUK, USA and Australia, today announces its unaudited interim results for the sixmonths to 30 June 2007. KEY POINTS • Group revenues increased 87% to £13.9 million (2006: £7.4 million) o Underlying growth (excluding acquisitions) of 14% o Recurring income represented 44% of sales at £6.2 million • Operating profit before amortisation of intangible assets up 66% to £2.9 million (2006: £1.7 million) • Pre-tax profit increased 17% to £1.9 million (2006: £1.6 million) • Earnings per share increased to 4.70 pence (2006: 4.66 pence) • The strategic acquisitions of The Gowi Group and Strictly Education have performed well, broadening the product range into the wider human capital management arena. • Post the period end; successful placing of 2,287,735 shares to raise approximately £5 million; providing funding to pursue its strategy for growth, both organically and through acquisition. Commenting on the results, Group Chief Executive Steve Russell said: "These are strong results with revenues increasing in all the geographic areaswe operate in. With a strong order book and prospect list we see good potentialfor the future growth of Bond." For further information, please contact: Bond International Software Plc: Tel: 01903 707070Steve Russell: Group Chief e-mail: bmorrison@bond.co.ukExecutiveBruce Morrison: Finance Director Buchanan Communications: Tel: 020 7466 5000Tim Thompson e-mail : nicolac@buchanan.uk.comNicola Cronk Oriel Securities Limited: Tel: 020 7710 7600Andrew Edwards Chairman's Statement I am delighted to announce a strong performance for the six months ended 30 June2007. These figures are the first results to be prepared on the basis of InternationalFinancial Reporting Standards (IFRS). Whilst the adoption of IFRS has nosignificant impact on the underlying financial performance of the group, theresults for the six months ended 30 June 2006 and for the year ended 31 December2006 have been restated in accordance with IFRS. Reconciliations of priorperiods' results, balance sheets and cash flows under IFRS are presented in note10. Group revenues for the six months ended 30 June 2007 increased by 87% to£13,881,000 (2006: £7,434,000) through a combination of organic growth of 14%and the acquisitions of The Gowi Group and Strictly Education which took placein January and February respectively. I am particularly pleased to report thatin line with our stated objective revenues of a recurring nature, such assoftware support and rental income, rose to £6,159,000 in the first 6 months of2007 compared with £3,345,000 for the same period in 2006. Recurring incomerepresented 44% of sales and covered 61% of group overheads. The growth in revenues in conjunction with the acquisitions led to a 63% rise inoperating profit, before the amortisation of intangible assets, to £2,896,000(2006 restated: £1,776,000) and a 17% increase in profit before tax to£1,924,000 (2006 restated: £1,646,000). Basic earnings per share rose marginally to 4.70p (2006 restated: 4.66p) with asimilar increase in the fully diluted earnings per share to 4.58p (2006restated: 4.54p). To assist in understanding the underlying operatingperformance of the group, we are also reporting adjusted profit and earnings pershare numbers excluding the effects of amortisation of certain intangible assetsand the value of share based payments. On this basis adjusted profit before taxwas up 44% to £1,815,000 (2006 restated: £1,263,000) and adjusted earnings pershare were up nearly 24% at 6.04p (2006 restated: 4.88p). At the start of 2007 the group had net cash of £8,118,000. In the first half of2007, the group cash generated £1,473,000 from operations (2006 restated:£149,000) which is less than the operating profit before amortisation ofintangible assets as a result of a decrease in deferred income at 30 June 2007compared with 31 December 2006. An element of this decrease relates to revenuesfrom the Manpower contract recognised in the period but for which cash wasreceived last year and an element relates to seasonality in invoicing forsupport income which tends to be weighted towards the calendar year end. Netinvestment in the period amounted to £10,194,000 of which £8,809,000 wasinvested in the acquisitions of Gowi and Strictly Education with £1,388,000spent on the acquisition of intangible assets and property, plant and equipment.This investment was funded partly from existing cash resources and partly from anew long term bank facility. Since the period end the group has raised approximately £5,000,000 through theplacing of 2,287,735 new shares with institutional shareholders. The placingallows the group to repay its bank borrowings and provides funding for the groupto pursue its strategy for growth both organically and through acquisition. Recruitment software division Revenues from the sales of recruitment software grew by 13.8% to £8,464,000(2006: £7,434,000), analysed by revenue types as follows: Year ended Six months ended 30 June 31 December 2007 2006 2006 £000 £000 £000 RevenueSoftware sales & services 4,730 3,923 10,085Software support 2,787 2,669 5,563Software rental 840 676 1,290 Software revenue 8,357 7,268 16,938 Hardware & other sales 107 166 271 8,464 7,434 17,209 Whilst revenues grew in all the geographical areas in which we operate, theprincipal driver for growth has been the increasing sale of software andservices in the United States as the group starts to roll out the deployment ofthe latest generation of Adapt. The group has also benefitted from the ongoingdeployment of software under the contract signed with Manpower in late 2006. Support revenues continued to grow albeit at a slightly reduced rate as moreclients opt for the rental model rather than the traditional licence sale. Thecorporate business continues to grow with notable orders from BMI, JetBlue andKnight in the first half of the year. Operating margins for the Recruitment Software division improved to 30% comparedto 27% in the first half of 2006 allowing the group to report an increase of 29%in operating profit before the amortisation of intangible assets to £2,551,000(2006 restated: £1,973,000). HR and payroll software The acquisition of Gowi in January 2007 took the group's activities beyondpurely recruitment and into the wider Human Capital Management arena. Gowispecialised in providing software into the human resources, payroll andrecruitment departments, primarily in the public and education sectors throughits three products, PPwin, Workforce and Payrite. Since acquisition the grouphas continued the work started by the former owners of Gowi in bringing thesebusinesses together under one company. In just under six months since acquisition the HR and payroll division generatedrevenues of £2,743,000 and an operating profit before the amortisation ofintangible assets of £409,000 in line with our expectations. Outsourced HR and payroll services Following the acquisition of Strictly Education Limited in February 2007, thegroup now provides outsourced HR and payroll services into the state schoolsector. As well as broadening the group's portfolio of products, one of thestrengths of this business is the level of recurring revenues from annualcontracts which at £723,000 represented 73% of total revenues in the periodsince acquisition. Overall, in just under five months between the date of acquisition and the endof the financial period, this business generated revenues of £989,000 and anoperating profit of £188,000, and is well on target to beat its budget for theyear. Web publishing and content management Abacus Software Limited, which was acquired as part of Gowi in January 2007,specialises in providing web publishing and content management software andservices, primarily to the publishing sector. In the period since acquisitionthis business generated revenues of £1,685,000 and an operating profit beforeamortisation of £198,000. Product Development Product development expenditure in the first six months of the year totaled2,004,000 representing 14.4% of sales, of which £1,122,000 (2006: £937,000) istreated as additions to intangible assets in accordance with IAS38 "IntangibleAssets", as it represents expenditure on new and enhanced products and the costof which will be amortised over their estimated useful lives. Current trading and future prospects The first half of 2007 has seen the group report a strong set of results withgrowth in our traditional markets as well as a positive contribution from theacquisitions. Despite recent uncertainties in financial markets, tradingconditions in the principal markets we serve remain positive. The group has alsotaken steps to broaden its product range into the wider human capital managementarena through the acquisitions of Gowi and Strictly Education and reduce itsdependence on the recruitment sector. The order book and prospect list continueto grow, and we remain confident of the group's prospects for the full year. Martin Baldwin Chairman 10 September 2007 Consolidated income statement for the 6 months ended 30 June 2007 (unaudited) Year ended Six months ended 30 June 31 December Note 2007 2006 2006 £000 £000 £000 (restated) (restated) Revenue 2 13,881 7,434 17,209 Cost of sales (699) (329) (915) Gross profit 13,182 7,105 16,294 Post-acquisition reorganisation (133) - -costsAdministrative expenses (10,153) (5,329) (11,580) Total administrative expenses (10,286) (5,329) (11,580) Operating profit before 2 2,896 1,776 4,714amortisation of intangibleassets Amortisation of intangible fixed (896) (138) (238)assets Profit before interest and tax 2,000 1,638 4,476 Finance costs (117) (38) (66)Finance income 41 46 144 Profit on ordinary activities 1,924 1,646 4,554before tax Income tax expense 3 (513) (440) (875) Profit for the periodattributable to equityshareholders 1,411 1,206 3,679 Earnings per share 4 Basic 4.70p 4.66p 13.66p Diluted earnings per share 4.58p 4.54p 13.36p Consolidated statement of recognised income and expense for the six months ended 30 June 2007 (unaudited) Year ended Six months ended 30 June 31 December 2007 2006 2006 £000 £000 £000 (restated) (restated) Exchange differences ontranslation of foreignoperations (48) (42) (245) Deferred tax on share based 23 8 53payment Net income recognised directly (25) (34) (192)in equity Profit for the financial 1,411 1,206 3,679period Total recognised income andexpense for the financialperiod 1,386 1,172 3,487 Consolidated balance sheet at 30 June 2007 (unaudited) At At 30 June 31 December 2007 2006 2006 Note £000 £000 £000 (restated) (restated) ASSETS Non-current assets Intangible fixed assets 13,311 4,138 5,050 Goodwill 14,390 4,891 4,869 Property, plant and equipment 2,806 2,453 2,523 Deferred tax assets 389 144 421 30,896 11,626 12,863 Current assets Inventories 21 - - Trade and other receivables 5,794 3,756 3,598 Cash and cash equivalents 1,537 4,746 8,770 7,352 8,502 12,368 Total assets 38,248 20,128 25,231 LIABILITIESCurrent liabilities Trade and other payables 7,941 3,650 6,263 Current tax liabilities 480 364 614 Financial liabilities 189 464 225 8,610 4,478 7,102 Non-current liabilities Financial liabilities 5,071 454 428 Provisions 2,521 202 292 7,592 656 720 Total liabilities 16,202 5,134 7,822 Net assets 22,046 14,994 17,409 EQUITY Share capital 7 305 278 281 Share premium account 7 12,772 9,086 9,180 Equity option reserve 7 328 262 266 Currency translation reserve 7 (294) (42) (246) Retained earnings 7 8,935 5,410 7,928 Total equity 22,046 14,994 17,409 Consolidated cash flow statement for the six months ended 30 June 2007 (unaudited) Year ended Six months ended 30 June 31 December 2007 2006 2006 Note £000 £000 £000 (restated) (restated) Cash flows from operatingactivities Cash generated from operations 6 1,473 149 6,219 Net interest (paid)/received (76) 8 78 Income tax paid (398) (372) (774) Net cash from operating activities 999 (215) 5,523 Cash flows from investingactivities Acquisition of subsidiaryundertakings net of cash and (8,809) - -overdraft acquiredPurchase of property plant, andequipment (266) (5) (415)Purchase of intangible assets (1,122) (937) (2,072)Proceeds from sale of property,plant and equipment 3 - 36 Net cash flows from investing (10,194) (942) (2,451)activities Cash flows from financingactivities Issue of ordinary share capital 118 2,904 3,000 Increase in bank loans 4,733 - - Repayment of bank loans (1,920) (42) (86) Repayment of other loans (455) (166) (368) New finance leases - 44 111 Repayment of finance leases (27) (24) (145) Equity dividend paid (427) (252) (252) Net cash inflow from financing 2,022 2,464 2,260activities (Decrease)/ Increase in cash andcash equivalents for the period (7,173) 1,307 5,332 Reconciliation of net cash flow tomovement in net funds (Decrease) / increase in cash and (7,173) 1,307 5,332cash equivalents (Increase) /decrease in bank loans (2,804) 42 86 Decrease in other loans 455 197 368 Loans and finance leases acquired (2,279) - -with subsidiary Decrease/ (Increase) in finance 18 (20) 34leases Change in net funds (11,783) 1,526 5,820Foreign currency translation (58) (67) (72)differences Net funds at 1 January 2007 8,118 2,370 2,370 Net (debt)/funds at 30 June 2007 (3,723) 3,829 8,118 Notes to the financial statements 1. Basis of preparation Bond International Software plc is incorporated in England and domiciled in theUnited Kingdom. Its registered office is Courtlands, Parklands Avenue, Goring,West Sussex BN12 4NG and its principal activities are the provision of softwaresolutions to companies operating in the recruitment industry, the provision ofHR and payroll software and the provision of outsourced services. The financialstatements are prepared in pounds sterling. The group has historically prepared its audited financial statements andunaudited interim results on the basis of UK Generally Accepted AccountingPractice ("UK GAAP"). In the current year the group has adopted InternationalFinancial Reporting Standards ("IFRS") for the first time as the group isrequired to present its annual consolidated financial statements in accordancewith accounting standards adopted for use in the European Union. As a resultthese interim accounts, which are unaudited, have been prepared on the basis ofthe accounting policies which will apply for the financial year to 31 December2007. These standards remain subject to ongoing amendment and/or interpretationand are therefore still subject to change. Accordingly, information contained inthese interim financial statements may need updating for subsequent amendmentsto IFRS required for first time adoption or for new standards issued post thebalance sheet date. This document includes reconciliations of the group's equityto IFRS at the date of transition of 1 January 2006 and at the comparativebalance sheet dates of 30 June 2006 and 31 December 2006, reconciliations of thegroup's results for the comparative periods ended to 30 June 2006 and 31December 2006. The comparative information for the six months ended 30 June 2006 and the yearended 31 December 2006 have been restated on the basis of IFRS. Reconciliationsbetween financial statements previously reported under UK GAAP and on the basisof IFRS are set out in note 10 to this interim statement in respect of theConsolidated Income Statements for the year ended 31 December 2006 and sixmonths ended 30 June 2006 and Consolidated Balance Sheets as at 1 January 2006,30 June 2006 and 31 December 2006. The interim financial statements do not include all of the information requiredfor full annual financial statements and do not comply with all the requirementsof IAS 34 'Interim Financial Reporting'. Accordingly whilst the interimfinancial statements have been prepared in accordance with the transitionalrules governing the move from UK GAAP to IFRS they cannot be construed as beingin full compliance with IFRS. The interim financial statements are unaudited and were approved by the board ofdirectors on 7 September 2007. The financial information contained in thesestatements does not constitute statutory accounts as defined in Section 240 ofthe Companies Act 1985. The financial information for the year to 31 December2006 has been extracted from the statutory accounts for that year and adjustedfor the conversion to IFRS. The statutory accounts for the year ended 31December 2006, which were prepared under UK GAAP, received an unqualified auditreport and did not contain a statement made under Section 237(2) and (3) of theCompanies Act 1985, and have been filed with the Registrar of Companies. Following the implementation of IFRS, the group's accounting policies have beenconsistently applied to all the periods presented unless otherwise stated. Theprincipal policies are set out below. Basis of consolidation The consolidated financial statements incorporate the financial statements ofBond International Software plc and of its subsidiaries. Subsidiaries are allentities over which the group has the power to govern financial and operatingpolicies, generally accompanying a shareholding of more than one half of thevoting rights. Subsidiaries are fully consolidated from the date on which thegroup takes control of a subsidiary. The group adopts the purchase method in accounting for the acquisition ofsubsidiaries. On acquisition the cost is measured at the fair value of theassets given, plus equity instruments issued and liabilities incurred or assumedat the date of exchange plus any costs directly attributable to the acquisition.The assets acquired and liabilities and contingent liabilities assumed in abusiness combination are measured at their fair value at the date ofacquisition. Any excess of the fair value of the consideration over the fairvalue of the identifiable net assets acquired is recorded as goodwill. Anydeficiency of the fair value of the consideration below the fair value ofidentifiable net assets acquired is credited to the income statement in theperiod of the acquisition. The results of subsidiary undertakings acquired or disposed of during the yearare included in the consolidated income statement from the effective date ofacquisition or up to the effective date of disposal. Where necessary, adjustments are made to the financial statements ofsubsidiaries to bring the accounting policies used into line with those used bythe group. Inter-company transactions and balances between group companies areeliminated. 1. Basis of preparation (continued) Critical accounting estimates and judgments Estimates and judgments are continually evaluated and are based on historicalexperience and other factors, including expectations of future events that arebelieved to be reasonable under the circumstances. Critical accounting estimates and assumptions The group makes estimates and assumptions concerning the future. Whilst thedirectors believe that the estimates and assumptions used in the preparation ofthe interim financial statements are reasonable, the resulting accountingestimates will, by definition, seldom equal the related actual results. Theestimates that have a significant risk of causing a material adjustment to thecarrying values of assets and liabilities within the next financial year arediscussed below. i) Impairment of goodwill The group tests annually whether the goodwill has suffered any impairment. Therecoverable amounts of cash-generating units have been determined based onvalue-in-use calculations which require the use of estimates. ii) Computer software The computation of the fair value of computer software acquired during theperiod is based on an estimate of the future cash flows arising from theownership of those software products. Differences in the actual cash flows fromthose anticipated at the date of acquisition may give rise to impairment in thevalue of the software. iii) Customer contracts and relationships Similarly the computation of the fair value of customer contracts andrelationships acquired is based on an estimate of future cash flows arising fromthose existing customers. Foreign currencies The results of overseas subsidiary companies are translated into sterling ataverage rates of exchange for the year and the group's net investment inoverseas subsidiary companies is translated into sterling at the rates ofexchange ruling at the balance sheet date. Differences arising on translationare added to or deducted from the group currency translation reserve. Transactions expressed in foreign currencies are translated into sterling andrecorded at rates of exchange approximating to those ruling at the date of thetransaction. Monetary assets and liabilities are translated at rates ruling atthe balance sheet date. Exchange differences are included in operating profit. Revenue recognition Revenue represents the fair value of the consideration received or receivablefor goods and services provided, excluding sales taxes. Revenue from the salesof licences is recognised on inception. Revenue from the sales of supportservices and rental agreements is recognised over the period of the contract.Revenue from contracts where the company is obliged to provide a range ofservices over a period of time is recognised at the time such services areprovided. Operating profit Operating profit represents the profit generated from operations before theamortisation of intangible assets. Exceptional items Items which are non-recurring and sufficiently material are presented separatelywithin their relevant consolidated income statement category. The separatereporting helps provide a better understanding of the group's underlyingbusiness performance. Basis of preparation (continued) Property, plant and equipment Depreciation is provided at the following annual rates in order to write offeach asset on a straight line basis over its estimated useful life. The rates inuse are: Freehold buildings - 2% - 4% Office equipment - 10% - 25% Fixtures and fittings - 10% - 25% Motor vehicles - 20% - 25% Freehold land is not depreciated. Assets' residual values and useful lives are reviewed and adjusted ifappropriate at each balance sheet date. Intangible assets Goodwill Goodwill represents the excess of the cost of an acquisition over the fair valueof the company's share of the net identifiable assets of the acquired subsidiaryat the date of acquisition. Goodwill is included in intangible assets and istested annually for impairment. Any impairment is recognised immediately in theincome statement and is not subsequently reversed. Goodwill arising on the acquisition of overseas subsidiaries is recorded in thefunctional currency of the acquired subsidiary and translated into thepresentation currency at the closing rate at each balance sheet date inaccordance with the group accounting policy of foreign currency. On disposal of a subsidiary, the amount of attributable goodwill is included inthe determination of the profit and loss on disposal. Computer software Acquired computer software licences are capitalised on the basis of the costsincurred to acquire and bring into use the specific software. These costs areamortised over their estimated useful lives. Costs associated with the production of identifiable and unique softwareproducts, including the payroll costs of the development teams, are recognisedas intangible assets when they meet the following criteria: i) the technical feasibility of the product can be demonstrated ii) it is probable that the product will generate future economic benefit iii) the costs of the product can be reliably measured iv) the group has the necessary resources available to complete the development of the product Computer software development costs capitalised as assets are amortised overtheir expected useful lives of between 5 and 10 years with amortisationcommencing once the computer software is fully implemented and brought into use. Customer contracts and customer lists Customer contracts and customer lists acquired with subsidiaries are recognisedat their fair value at the date of acquisition and amortised over periods notexceeding three years. Impairment of intangible and tangible fixed assets Intangible assets that have an indefinite life and are not subject toamortisation are tested annually for impairment. Other tangible and intangibleassets that are subject to amortisation or depreciation are tested forimpairment whenever events or changes in circumstances indicate that thecarrying amount may not be recoverable. An impairment loss is recognised for theamount by which the asset's carrying amount exceeds its recoverable amount. Anyimpairment losses are charged to the income statement in the period in whichthey are identified. Where an asset does not generate cash flows that areindependent of other assets, the assets are allocated to cash-generating unitsand the group tests the recoverable amount of the cash-generating unit to whichthe asset belongs. Employee benefits Pensions Pension contributions are made for a number of directors and employees on adefined contribution basis. Contributions payable for the year are charged inthe profit and loss account. The group has no further payment obligations oncethe contributions have been paid. Share based payments The group operates a number of share option schemes which allow employees toacquire shares in the company. Where the company awards share options underthese schemes, the fair value of options granted is calculated at the grant dateusing the Black Scholes Model and the resulting cost is charged to the incomestatement over the vesting period during which the recipient becomesunconditionally entitled to exercise the option and credited to the EquityOption Reserve. Inventories Inventories are stated at the lower of costs and net realisable value. Taxation Income tax expense represents the aggregate of the current tax and deferred taxcharges. The current tax charge is based on taxable profit for the period.Taxable profit differs from profit before tax as reported in the incomestatement as it excludes items of income or expense that are taxable ordeductible in other years or are never taxable or deductible. The group'sliability for current tax is calculated using tax rates that have been enactedor substantially enacted by the balance sheet date. Deferred taxation is provided in full using the liability method on temporarydifferences between the tax bases of assets and liabilities and their carryingamounts in the consolidated financial statements. Deferred tax is determinedusing tax rates that have been enacted at or substantially enacted by thebalance sheet date and are expected to apply when the related deferred tax assetis realised or the deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that futuretaxable profit will be available against which the temporary differences can beutilised. Leases Where an asset is acquired under a finance lease, the asset is capitalised andthe corresponding liability to the finance company is included in creditors.Depreciation on assets held under finance leases is provided in accordance withthe policy noted in (d) above. Finance lease payments are treated as consistingof capital and interest elements and the interest is charged to the profit andloss account on a geometric basis over the period of the agreement. Rentals payable under operating leases are charged to the profit and lossaccount on a straight line basis over the period of the lease. 1. Basis of preparation (continued) Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call withbanks, other short term highly liquid funds with original maturities of threemonths or less and bank overdrafts. Bank overdrafts are shown within borrowingin current liabilities on the balance sheet. Cash held in the Strictly Education Limited client account is not includedwithin cash and cash equivalents because it is held on behalf of third partiesand is netted off against the corresponding liability to those clients. Financial instruments Financial assets and liabilities are recognised in the balance sheet when thegroup becomes party to the contractual provisions of the instrument. Trade and other receivables Trade receivables are measured at cost less any provision necessary when thereis objective evidence that the group will not be able to collect all amountsdue. Trade and other payables Trade and other payables are not interest bearing and are measured at originalinvoice amount. 2. Segmental Review (i) Primary business segment Segmental information is presented in respect of the group's business segments.The primary business segments are based on the group's reporting structure andcomprise Recruitment Software, HR and Payroll Software, HR outsourcing and WebPublishing and Content Management. Segment results include items directly attributable to a segment as well asthose that can be allocated on a reasonable basis. Unallocated items comprisemainly corporate and head office expenses. Year ended Six months ended 30 June 31 December 2007 2006 2006 £000 £000 £000 (restated) (restated) RevenueRecruitment Software 8,464 7,434 17,209HR and Payroll Software 2,743 - -Outsourcing 989 - -Web publishing and content 1,685 - -management 13,881 7,434 17,209 Operating profit before theamortisation of intangible assetsRecruitment Software 2,551 2,006 5,210HR and Payroll Software 409 - -Outsourcing 188 - -Web publishing and content 198 - -managementCentral departments (450) (230) (496) 2,896 1,776 4,714 2. Segmental review (i) Primary business segment (continued) Year ended Six months ended 30 June 31 December 2007 2006 2006 £000 £000 £000 (restated) (restated)Total assetsRecruitment Software 17,677 17,220 22,617HR and Payroll Software 12,926 - -Outsourcing 4,154 - -Web publishing and content 3,399 - -managementUnallocated assets 92 2,908 2,614 38,248 20,128 25,231 Total liabilitiesRecruitment Software 5,309 4,536 7,096HR and Payroll Software 3,380 - -Outsourcing 700 - -Web publishing and content 925 - -managementUnallocated liabilities 5,888 598 726 16,202 5,134 7,822 Cost of property, plant andequipment acquired during the periodRecruitment Software 140 5 390HR and Payroll Software 57 - -Outsourcing 53 - -Web publishing and content 11 - -managementCentral departments 5 - 25 266 5 415 Cost of intangible assets acquiredduring the periodRecruitment Software 1,122 937 2,072HR and Payroll Software - - -Outsourcing - - -Web publishing and content - - -managementCentral departments - - - 1,122 937 2,072 2. Segmental review (i) Primary business segment (continued) Year ended Six months ended 30 June 31 December 2007 2006 2006 £000 £000 £000 (restated) (restated) Depreciation of tangible fixedassets charged during the periodRecruitment Software 117 100 380HR and Payroll Software 9 - -Outsourcing 6 - -Web publishing and content 27 - -managementCentral departments 33 - - 192 100 380 Amortisation of intangible assetsduring the periodRecruitment Software 403 138 238HR and Payroll Software 379 - -Outsourcing 63 - -Web publishing and content 51 - -managementCentral departments - - - 896 138 238 ii) Geographical analysis of revenue by location of client RevenueUnited Kingdom 9,593 4,167 8,671Europe 373 234 480Asia Pacific 477 400 752Other 69 24 109North & South America 3,369 2,609 7,197 13,881 7,434 17,209 iii) Segmental analysis by location of operating company Year ended Six months ended 30 June 31 December 2007 2006 2006 £000 £000 £000 (restated) (restated) RevenueUnited Kingdom 10,659 4,465 11,037Asia Pacific 461 377 738North & South America 2,761 2,592 5,434 13,881 7,434 17,209 2. Segmental review (continued) iii) Segmental analysis by location of operating company (continued) Year ended Six months ended 30 June 31 December 2007 2006 2006 £000 £000 £000 (restated) (restated) AssetsUnited Kingdom 31,767 14,430 15,826Asia Pacific 890 616 620North & South America 5,591 5,082 8,785 38,248 20,128 25,231Cost of property, plant and equipmentacquired during the periodUnited Kingdom 182 1 239Asia Pacific 7 2 162North & South America 77 2 14 266 5 415 Cost of intangible assets acquiredduring the periodUnited Kingdom 725 585 1,302Asia Pacific - - -North & South America 397 352 770 1,122 937 2,072 (iv) Revenue and operating profit from acquisitions Year ended Six months ended 30 June 31 December 2007 2006 2006 £000 £000 £000 (restated) (restated) RevenueContinuing operations 8,464 7,434 17,209 AcquisitionsThe Gowi Group 4,428 - -Strictly Education Limited 989 - - 5,417 - - Total revenue 13,881 7,434 17,209 Operating profitContinuing operations 2,233 1,743 4,714 AcquisitionsThe Gowi Group 474 - -Strictly Education Limited 189 - - 663 - - Total operating profit before 2,896 1,743 4,714amortisation of intangible assets 3. Taxation Year ended Six months ended 30 June 31 December 2007 2006 2006 £000 £000 £000 (restated) (restated) Current tax - United Kingdom 270 309 962 - Overseas 43 39 38 Deferred tax 200 92 (125) 513 440 875 The total tax charge for the six months ended 30 June 2007 is less than thestandard rate of corporation tax in the UK of 30% principally as a result of thetax credit arising on the exercise of share options to which the provisions ofIFRS2 'Share-based payments' do not apply as they were awarded prior to 7November 2002. 4. Earnings per share The basic earnings per share is based on attributable profit for the period of£1,411,000 (June 2006 restated: £1,206,000; year ended 31 December 2006restated: £3,679,000) and on 30,066,032 ordinary shares (June 2006: 25,876,041;year ended 31 December 2006: 26,932,952) being the weighted average number ofordinary shares in issue during the periods. The diluted earnings per share is based on attributable profit for the periodof £1,411,000 (June 2006 restated: £1,206,000; year ended 31 December 2006restated: £3,679,000) and on 27,533,859 ordinary shares (June 2006: 26,566,066;year ended 31 December 2006: 27,533,859), calculated as follows: Year ended Six months ended 30 June 31 December 2007 2006 2006 No No No Basic weighted average number of shares 30,066,032 25,876,041 26,932,952Dilutive potential ordinary shares: Share options 772,272 690,015 600,907 30,838,304 26,566,056 27,533,859 4. Earnings per share (continued) The Chairman's Statement shows a comparison between the earnings per shareadjusted for the impact of the amortisation of certain intangible assets for theperiods covered by this interim statement. The adjusted earnings per share arebased on attributable profit calculated as follows: Year ended Six months ended 30 June 31 December 2007 2006 2006 £000 £000 £000 Profit for the financial period 1,411 1,206 3,679Adjustments:Amortisation of intangible assets arising on acquisitions 491 - -Share based payment expense 85 81 130Taxation effect (172) (24) (39) Adjusted profit 1,815 1,263 3,770 Adjusted earnings per share 6.04p 4.88p 14.00p 5. Dividend Year ended Six months ended 30 June 31 December 2007 2006 2006 £000 £000 £000 (restated) (restated) Dividend paid to equity shareholdersDividend of 1.4 per share (2006: 427 252 2521.0p) 6. Reconciliation of operating profit to net cash generated from operatingactivities Year ended Six months ended 30 June 31 December 2007 2006 2006 £000 £000 £000 (restated) (restated) Operating profit 2,000 1,638 4,476Depreciation of tangible fixed 192 100 380assetsAmortisation of intangible assets 896 138 239Profit on disposal of fixed assets (1) - (15)Share based payment expense 85 81 130Decrease in inventories 72 - -(Increase)/decrease in debtors 64 (648) (627)(Decrease)/increase in creditors (1,835) (1,160) 1,636 Cash generated by operations 1,473 149 6,219 7. Statement of changes in shareholders' equity Equity Currency Share Share option translation Retained capital Premium reserve reserve earnings Total Six months ended 30 June 2007 £000 £000 £000 £000 £000 £000 At 1 January 2007 281 9,180 266 (246) 7,928 17,409Currency translation - - - (48) - (48)adjustmentsIssue of new ordinary shares 24 3,592 - - - 3,616Share based payments - - 85 - - 85Share options lapsed or - - (23) - 23 -exercisedProfit for the period - - - - 1,411 1,411Dividend - - - - (427) (427) At 30 June 2007 305 12,772 328 (294) 8,935 22,046 Equity Currency Share Share option translation Retained capital Premium reserve reserve earnings Total Six months ended 30 June 2006 £000 £000 £000 £000 £000 £000 At 1 January 2006 252 6,209 189 - 4,448 11,098Currency translation - - - (42) - (42)adjustmentsIssue of new ordinary shares 26 2,877 - - - 2,903Share based payments - - 81 - - 81Share options lapsed or - - (8) - 8 -exercisedProfit for the period - - - - 1,206 1,206Dividend - - - - (252) (252) At 30 June 2006 278 9,086 262 (42) 5,410 14,994 Equity Currency Share Share option translation Retained capital Premium reserve reserve earnings Total Year ended 31 December 2006 £000 £000 £000 £000 £000 £000 At 1 January 2006 252 6,209 189 - 4,448 11,098Currency translation - - - (246) - (246)adjustmentsIssue of new ordinary shares 29 2,971 - - - 3,000Share based payments - - 130 - - 130Share options lapsed or - - (53) - 53 -exercisedProfit for the period - - - - 3,679 3,679Dividend - - - - (252) (252) At 31 December 2006 281 9,180 266 (246) 7,928 17,409 8. Acquisitions (i) The Gowi Group Limited On 19 January 2007 the group completed the acquisition of 100% of the equityshare capital of The Gowi Group Limited for a total consideration of £9,119,000(including costs) which was settled by cash of £5,622,000 and the issue of newordinary shares with a fair value of £3,497,000 based on the share price at thedate of acquisition. The provisional impact of the acquisition on theconsolidated balance sheet was: Net book Provisional values fair value adjustments Total £000 £000 £000 Intangible fixed assets - 6,888 6,888Goodwill 6,430 (6,430) -Other fixed assets 193 - 193Inventories 59 - 59Trade and other receivables 2,298 - 2,298Trade and other payables (3,384) - (3,384)Deferred tax - (1,722) (1,722)Bank loan (1,875) - (1,875)Other loans (404) - (404)Cash and overdrafts (612) - (612) Fair value of assets acquired 1,441 Goodwill 7,678 Fair value of consideration 9,119 Comprising:Net cash 5,622Shares issued 3,497 9,119 (ii) Strictly Education Limited On 15 February 2007 the group completed the acquisition of 100% of the equityshare capital of Strictly Education Limited for a total consideration of£2,735,000 including costs all of which was paid by cash. The provisional impactof the acquisition on the consolidated balance sheet was: Net book Provisional values fair value adjustments Total £000 £000 £000 Intangible fixed assets 57 1,101 1,158Other fixed assets 38 - 38Trade and other receivables 132 - 132Current liabilities (95) - (95)Other loans (174) - (174)Deferred tax - (330) (330)Cash and overdrafts 160 - 160 Fair value of assets acquired 889 Goodwill 1,846 Fair value of consideration 2,735 9. Post balance sheet events On 2 August 2007 the company announced the placing of 2,287,735 new ordinaryshares at a price of 220 pence per share raising gross proceeds £5,033,217. Theimpact is to reduce net debt by approximately £5,000,000 and increase equityshareholders fund by the same amount. 10. Principal impact of IFRS The key differences between UK GAAP and IFRS that will impact the group are setout below. The rules for the first time adoption of IFRS are set out in IFRS1 'First TimeAdoption of International Financial Reporting Standards'. The rules state that acompany should use the same accounting policies in its opening IFRS balancesheet and throughout all periods presented in its first IFRS financialstatements. In preparing this financial information, the group has, aspermitted, under IFRS1 'First Time Adoption of International Financial ReportingStandards' elected to apply the following exemptions: • In relation to the treatment of brought forward goodwill amortisation, the group has elected to treat the net book value of goodwill as measured under UK GAAP at 31 December 2005 as the deemed cost of goodwill under IFRS3 as at 1 January 2006. • In relation to the cumulative exchange translation differences in reserves, the group has elected that the cumulative translation differences arising on the translation of the assets and liabilities of overseas subsidiaries are deemed to be £nil at 1 January 2006, the effective date of transition to IFRS. • In relation to the treatment of goodwill arising on the acquisition of overseas subsidiaries, the group has elected not to apply IAS21 retrospectively to fair value adjustments and goodwill arising in previous business combinations that occurred before the date of transition to IFRS. Software development costs Under UK GAAP, certain of the costs of developing software, principally internalcosts, were written off to the income statement in the year in which they wereincurred. Under IAS38 'Intangible assets', the group is required to capitalisethe cost of software development where certain recognition criteria are met,including technical feasibility and probable future economic benefit. Thecapitalised cost is then amortised over the expected future life of thedeveloped software. As a result of this change in accounting policy the group's net assets underIFRS have increased by £572,000 at 1 January 2006, £747,000 as at 30 June 2006and £968,000 at 31 December 2006, before the impact of deferred tax. Profitbefore tax increased for the six month period ended 30 June 2006 by £212,000 andfor the year ended 31 December 2006 by £465,000 as a result of thecapitalisation of development costs previously written under UK GAAP of £350,000and £669,000 respectively, offset by amortisation of amounts capitalised of£138,000 and £204,000. Goodwill Under UK GAAP, the group was amortising goodwill arising on acquisitions overperiods of between 10 and 20 years. Under IFRS 3 'Business combinations',goodwill is not amortised but instead is subject to annual impairment tests ormore frequently if there is an indication of impairment. As discussed above the group has elected to treat the net book value of goodwillat 31 December 2005 as the deemed cost of goodwill under IFRS3 at 1 January2006. Subsequent amortisation provided under UK GAAP has been written back underIFRS with the result that net assets at 30 June 2006 and 31 December 2006 haveincreased by £214,000 and £433,000 respectively before any impact of deferredtaxation and profit before taxation for the six months ended 30 June 2006 andyear ended 31 December 2006 have increased by £214,000 and £433,000respectively. 10. Principal impact of IFRS Goodwill (continued) At 30 June 2006 the group had not decided to take advantage of the election toapply IAS 21 retrospectively to fair value adjustments and goodwill arising inprevious business combinations that occurred before the date of transition toIFRS. The result was that goodwill arising on the acquisition of eEmpACTSoftware Inc in February 2005 was included in the consolidated accounts for thesix months to 30 June 2006 in US dollars which is the functional currency ofeEmpACT Software Inc. This gave rise to a foreign currency translationdifference when the asset was revalued at the closing exchange rate at 30 June2006. In adopting IFRS the group subsequently elected not to apply theprovisions of IAS21 retrospectively and the goodwill arising on the acquisitionof eEmpACT Software Inc is included in the consolidated accounts at the sterlingvalue at the date of acquisition. The net effect of this change is to increaseequity at 30 June 2006 by £195,000 but there is no effect on the incomestatement for this or subsequent periods. Intangible assets Under UK GAAP certain assets were included as tangible fixed assets in thegroup's balance sheet but under IFRS these fall to be treated as intangibleassets. The change has no impact on the net assets of the business or profitbefore taxation. Foreign currency Under UK GAAP foreign exchange differences arising on the retranslation of thenet assets of overseas subsidiaries were written off directly to retainedearnings. Under IAS 21 'The effects of changes in foreign exchange rates', thesedifferences are required to be separately identified as part of equity. Thecompany has elected under IFRS1 that the cumulative translation differences at 1January 2006 were £nil. The change has no impact on the net assets of the business or the profit beforetaxation for any period but reduces retained earnings by £64,000 at 30 June 2006and increases retained earnings by £246,000 at 31 December 2006. Deferred taxation Under UK GAAP deferred taxation is provided using the liability method on alltiming differences between the profit computed for taxation purposes and theprofit stated in the financial statements with deferred tax assets only includedin the financial statements if recovery is more likely than not. Under IFRS, IAS12 'Income taxes' requires that deferred tax is provided on the temporarydifferences between the tax base and accounting base of balance sheet itemsincluded in the group's balance sheet. This means that deferred tax isrecognised on certain temporary differences that would not have given rise todeferred tax under UK GAAP. Under IFRS deferred tax is provided on temporary differences arising oninvestments in subsidiaries (principally in respect of unremitted earnings)except where an entity can control the timing of the reversal of the temporarydifference and it is probable that the temporary difference will not arise inthe foreseeable future. The group has decided that the remittance of earningsheld by overseas subsidiaries is not probable and therefore no deferred tax hasbeen provided. The carrying values of deferred tax assets and liabilities have been adjusted toreflect the restatement of assets and liabilities under IFRS. As a result ofthis the group's net assets have decreased by £176,000 at 1 January 2006,£273,000 at 30 June 2006 and £386,000 at 31 December 2006. It has also givenrise to a decrease in profit after taxation of £112,000 and £237,000 for theperiods ended 30 June 2006 and 31 December 2006 respectively. Reconciliations The following pages show the reconciliation of Profit under UK GAAP to Profitunder IFRS for the 6 months ended 30 June 2006 and the year ended 31 December2006 and Equity under UK GAAP to Equity under IFRS at 1 January 2006, 30 June2006 and 31 December 2006. Reconciliation of Profit from UK GAAP to IFRS (unaudited) 6 months ended 30 June 2006 Year ended 31 December 2006 Under UK GAAP Effect of Under IFRS Under UK GAAP Effect of Under IFRS transition to transition to £000 IFRS £000 £000 IFRS £000 £000 £000 Revenue 7,434 - 7,434 17,209 - 17,209 Cost of sales (329) - (329) (915) - (915) Gross profit 7,105 - 7,105 16,294 - 16,294 Administrative expenses (5,679) 350 (5,329) (12,249) 669 (11,580) Operating profit before the 1,426 350 1,776 4,045 669 4,714amortisation of intangibleassets Amortisation of intangible fixed (214) 76 (138) (467) 229 (238)assets Operating profit 1,212 426 1,638 3,578 898 4,476 Finance costs (38) - (38) (66) - (66)Finance income 46 - 46 144 - 144 Profit on ordinary activities 1,220 426 1,646 3,656 898 4,554before tax Tax on profit on ordinary (328) (112) (440) (638) (237) (875)activities Profit for the financial period 892 314 1,206 3,018 661 3,679 Earnings per share Basic 3.45p 1.21p 4.66p 11.20p 2.46p 13.66p Diluted earnings per share 3.36p 1.18p 4.54p 10.96p 2.40p 13.36p £000 Profit under UK GAAP 892 3,018Capitalisation of intangible 350 669assetsAmortisation of capitalised (138) (204)development costsAmortisation of goodwill 214 433Tax effect on IFRS adjustments (112) (237) Profit under IFRS 1,206 3,679 Reconciliation of Equity at 1 January 2006 (unaudited) As at 1 January 2006 Under UK GAAP Effect of Under IFRS transition to £000 IFRS £000 £000ASSETS Non-current assets Intangible fixed assets 2,175 1,205 3,380 Goodwill 5,168 (277) 4,891 Property, plant and equipment 2,647 (171) 2,476 Deferred tax assets 403 (227) 176 10,393 530 10,923 Current assets Trade and other receivables 3,077 - 3,077 Cash and cash equivalents 3,511 - 3,511 6,588 - 6,588 Total assets 16,981 530 17,511 LIABILITIESCurrent liabilities Trade and other payables 4,754 - 4,754 Current tax liabilities 383 - 383 Financial liabilities 544 - 544 5,681 - 5,681 Non-current liabilities Financial liabilities 598 - 598 Provisions - 134 134 598 134 732 Total liabilities 6,279 134 6,413 Net assets 10,702 396 11,098 EQUITY Share capital 252 - 252 Share premium account 6,209 - 6,209 Equity option reserve 189 - 189 Currency translation reserve - - - Retained earnings 4,052 396 4,448 Total equity 10,702 396 11,098 Total equity under UK GAAP 10,702Capitalisation of intangible 768assetsAmortisation of intangible (196)assetsAmortisation of goodwill -Tax effect of IFRS adjustments (176) Total equity under IFRS 11,098 Reconciliation of Equity at 30 June 2006 (unaudited) As at 30 June 2006 Under UK GAAP Effect of Under IFRS transition to £000 IFRS £000 £000ASSETS Non-current assets Intangible fixed assets 2,712 1,426 4,138 Goodwill 4,758 133 4,891 Property, plant and equipment 2,671 (218) 2,453 Deferred tax assets 400 (256) 144 10,541 1,085 11,626 Current assets Trade and other receivables 3,756 - 3,756 Cash and cash equivalents 4,746 - 4,746 8,502 - 8,502 Total assets 19,043 1,085 20,128 LIABILITIESCurrent liabilities Trade and other payables 3,650 - 3,650 Current tax liabilities 364 - 364 Financial liabilities 464 - 464 4,478 - 4,478 Non-current liabilities Financial liabilities 454 - 454 Provisions - 202 202 454 202 656 Total liabilities 4,932 202 5,134 Net assets 14,111 883 14,994 EQUITY Share capital 278 - 278 Share premium account 9,086 - 9,086 Equity option reserve 262 - 262 Currency translation reserve (108) 66 (42) Retained earnings 4,593 817 5,410 Total equity 14,111 883 14,994 Total equity under UK GAAP 14,111Capitalisation of intangible 1,009assetsAmortisation of intangible (262)assetsAmortisation of goodwill 214Goodwill on acquisition of 195overseas subsidiaryTax effect of IFRS adjustments (273) Total equity under IFRS 14,994 Reconciliation of Equity at 31 December 2006 (unaudited) As at 31 December 2006 Under UK GAAP Effect of Under IFRS transition to £000 IFRS £000 £000 ASSETS Non-current assets Intangible fixed assets 3,427 1,623 5,050 Goodwill 4,714 155 4,869 Property, plant and equipment 2,715 (192) 2,523 Deferred tax assets 700 (279) 421 11,556 1,307 12,863 Current assets Trade and other receivables 3,598 - 3,598 Cash and cash equivalents 8,770 - 8,770 12,368 - 12,368 Total assets 23,924 1,307 25,231 LIABILITIESCurrent liabilities Trade and other payables 6,263 - 6,263 Current tax liabilities 614 - 614 Financial liabilities 225 - 225 7,102 - 7,102 Non-current liabilities Financial liabilities 428 - 428 Provisions - 292 292 428 292 720 Total liabilities 7,530 292 7,822 Net assets 16,394 1,015 17,409 EQUITY Share capital 281 - 281 Share premium account 9,180 - 9,180 Equity option reserve 266 - 266 Currency translation reserve - (246) (246) Retained earnings 6,667 1,261 7,928 Total equity 16,394 1,015 17,409 Total equity under UK GAAP 16,394Capitalisation of intangible 1,295assetsAmortisation of intangible (327)assetsAmortisation of goodwill 433Tax effect of IFRS adjustments (386) Total equity under IFRS 17,409 Reconciliation of Cash Flows from UK GAAP to IFRS (unaudited) 6 months ended 30 June 2006 Year ended 31 December 2006 Under UK GAAP Effect of Under IFRS Under UK GAAP Effect of Under IFRS transition to transition to £000 IFRS £000 £000 IFRS £000 £000 £000 Cash flows from operating activities Cash generated from operations (168) 317 149 5,550 669 6,219 Net interest received 8 - 8 78 - 78 Income tax paid (372) - (372) (774) - (774) Net cash from operating activities (532) 317 (215) 4,854 669 5,523 Cash flows from investing activities Purchase of property plant, and (85) 80 (5) (504) 89 (415)equipment Purchase of intangible assets (540) (397) (937) (1,314) (758) (2,072) Proceeds from sale of property, plant - - - 36 - 36and equipment Net cash flows from investing activities (625) (317) (942) (1,782) (669) (2,451) Cash flows from financing activities Issue of ordinary share capital 2,904 - 2,904 3,000 - 3,000 Repayment of bank loans (42) - (42) (86) - (86) Repayment of other loans (166) - (166) (368) - (368) New finance leases 44 - 44 111 - 111 Repayment of finance leases (24) - (24) (145) - (145) Equity dividend paid (252) - (252) (252) - (252) Net cash inflow from financing 2,464 - 2,464 2,260 - 2,260activities Increase in cash and cash equivalents 1,307 - 1,307 5,332 - 5,332for the period This information is provided by RNS The company news service from the London Stock Exchange