Ceps Regulatory News (CEPS)

24 Sep 2007 07:00

CEPS PLC ("CEPS" OR THE "COMPANY") HALF-YEARLY UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007 HIGHLIGHTS

* Group turnover up 104 per cent. *

* Operating profit up 248 per cent. *

* Profit before tax up 304 per cent. from ‚£101,000 to ‚£408,000 *

* EPS up 51 per cent. from 2.47p to 3.74p for the period *

* Sunline Direct Mail Limited included from February 2007

CHAIRMAN'S STATEMENT

Overview:

The Group has made considerable progress in the last six months. The Sunline Direct Mail business acquired in February 2007 has been successfully integrated into the Group. Trading in the polywrapping business has been satisfactory in the traditionally quieter half of the year whilst performance at the direct mail solutions business has been better than expected.

On a like for like basis, Friedman's and Davies Odell have delivered good turnover growth which has resulted in better than expected profitability. Both units are now benefiting from their respective relocation and restructuring which occurred last year. Further, the flow of new products for 2007 and beyond is increasing in both businesses.

Overall, Group profit before tax has increased substantially to ‚£408,000 (2006: ‚£101,000).

A number of potential acquisition opportunities are currently under review, both as enhancements to existing activities and stand-alone businesses in their own right. As yet, no formal discussions have commenced.

Financial Results:

These are the first set of results since the adoption of International Financial Reporting Standards (IFRS). Comparative figures have been restated to comply with IFRS and a detailed explanation of the changes is given in note 5 to the financial information below.

Group profit before tax for the six months to 30 June 2007 was ‚£408,000 (2006: ‚£101,000) and, after tax of ‚£77,000 (2006: ‚£6,000), the resultant net profit after tax for the period was ‚£331,000 (2006: ‚£95,000).

Earnings per share, basic and diluted, were 3.74p (2006: 2.47p), the figures taking account of the 1 for 50 share consolidation and placing of 4,750,000 new shares in February 2007.

Cash generated from operations in the six months to 30 June 2007 was ‚£650,000 (2006: ‚£410,000). The share placing raised ‚£2,375,000 before expenses. The investment by the Group in Sunline Direct Mail (Holdings) Limited was ‚£ 1,242,000 after deducting cash of ‚£208,000 acquired with the business. The total expenses of the share placing and acquisition were ‚£756,000.

Total bank loans at 30 June 2007 of ‚£2,616,000 (2006: ‚£981,000) include ‚£ 2,496,000 (2006: ‚£794,000) secured against the assets of subsidiary companies and with no recourse to the rest of the Group. The increase includes ‚£2,000,000 of bank finance related to the acquisition of Sunline Direct Mail Limited.

The Group balance sheet remains strong. Total capital and reserves attributable to equity holders of the Company were ‚£3,788,000 (30 June 2006: ‚£804,000).

Operational Review:

By comparison with the first half of 2006, Group sales are up 104 per cent from ‚£3,526,000 to ‚£7,188,000 generating an operating profit before depreciation of ‚£791,000 (2006: ‚£301,000), after deducting adviser costs of ‚£71,000 incurred on an abortive transaction. Group costs for the six months are up 38 per cent at ‚£ 134,000 (2006: ‚£97,000), reflecting the appropriate costs of managing a Group of this size. After interest, this resulted in a highly satisfactory increase in Group profit before tax to ‚£408,000 (2006: ‚£101,000)

On a like for like basis, turnover and profitability growth has been encouraging across the Group.

Friedman's

Turnover for the first half was up 6.6 per cent and profitability up by 26.9 per cent. The exclusive distribution deal on Italian crepe lycra contributed to this, as has the richer sales mix of longer-margin print fabrics.

Davies Odell

Turnover has grown 14.7 per cent with profit up 41.0 per cent. Most areas of business have performed in line with expectation. Of particular note, however, has been the sales growth in `Forcefield' products as foreshadowed in the 2006 year-end Chairman's statement. Substantial growth has been achieved both through the launch of new products, a significantly extended UK dealership network and strong distributor performance in the USA and Scandinavia.

Two recent achievements are particularly noteworthy: In July it was confirmed that Forcefield will be the body protection product sponsors of the GB Snowsport (Ski and snowboard) team from 2008 through to the 2010 Winter Olympics in Vancouver. More recently, Kawasaki Europe have ordered a large quantity of back protectors to be co-branded Forcefield.

Sunline Direct Mail

The results for the period since acquisition in February 2007 are now included. Sunline's sales have been broadly in line with expectations with the lettershop (Sunline Solutions) business in Redditch producing a significant turnaround in profitability. The segmental profit before depreciation was ‚£458,000 for the period, a ratio of 14.1 per cent to sales.

Dividend:

Provided that the business performs in line with expectations in the second half of 2007, it is the Board's intention to recommend the payment of a dividend in respect of the full year.

Prospects:

From a trading perspective, all Group businesses have started the second half slowly, in line with low comparable levels of a year ago.

The order book at Sunline Direct Mail looks solid for the forthcoming three months and trading at Sunline Solutions is consistent with the first half.

Friedman's has had a somewhat better start than the other businesses (against a very weak July 2006) but will have to contend with the strong comparative performance in the last four months of last year. The management are however optimistic that they can deliver meaningful turnover and profit growth for the year.

Davies Odell experienced weak trading in July 2007 and business has slowly recovered in August. Management remain concerned about female fashion moving away from replacement stiletto heel top-pieces, but have reason to be optimistic about Forcefield and matting sales, with a number of new products coming on stream.

Overall the Board anticipate that the Group will show steady progress in the second half.

Richard OrganChairman24 September 2007CEPS PLC

Consolidated Income Statement

Six months ended 30 June 2007

Unaudited (restated) (restated) 6 months to 6 months to 12 months to 30 June 30 June 31 December 2007 2006 2006 ‚£'000 ‚£'000 ‚£'000 Revenue 7,188 3,526 7,709 Cost of sales (6,049) (2,953) (6,504) Gross profit 1,139 573 1,205 Net operating expenses (606) (420) (820) Operating profit 533 153 385 Analysis of operating profit - Trading 738 250 593 - Abortive acquisition costs (71) - - - Group costs (134) (97) (208) Finance costs (125) (52) (106) Profit before tax 408 101 279 Taxation (77) (6) 158 Profit for the period 331 95 437 Attributable to: Equity holders of the Company 270 88 426 Minority interest 61 7 11 331 95 437 Earnings per share - basic 3.74p 2.47p 11.95p - diluted 3.74p 2.47p 11.95p Statement of Recognised Income & Expense Unaudited (restated) (restated) 6 months to 6 months to 12 months to 30 June 30 June 31 December 2007 2006 2006 ‚£'000 ‚£'000 ‚£'000 Actuarial gain on retirement - - 59benefit obligations Net income recognised directly in - - 59equity Profit for the period 331 95 437 Total recognised income for the 331 95 496period Attributable to: Equity holders of the Company 270 88 485 Minority interest 61 7 11 331 95 496CEPS PLCConsolidated Balance SheetAs at 30 June 2007 Unaudited (restated) (restated) As at As at As at 30 June 30 June 31 December 2007 2006 2006 ‚£'000 ‚£'000 ‚£'000 Assets Non-current assets Property, plant and equipment 1,180 288 279 Intangible assets 5,330 1,529 1,529 Deferred tax asset 144 202 155 6,654 2,019 1,963 Current assets Inventories 1,459 1,154 1,324 Trade and other receivables 3,095 1,288 1,793 Deferred tax asset 45 16 218 Cash and cash equivalents 463 39 35 5,062 2,497 3,370 Total assets 11,716 4,516 5,333 Equity Capital and reserves attributable to equity holders of the Company Called up share capital 416 178 178 Share premium 2,755 676 676 Retained earnings 617 (50) 347 3,788 804 1,201 Minority interest in equity 219 133 138 Total equity 4,007 937 1,339 Liabilities Non-current liabilities Bank borrowings - loans & overdrafts 1,924 745 566 Other loans 330 - - Trade and other payables 139 - 27 Retirement benefit liabilities 470 637 517 Provisions 32 36 32 Other creditors 500 - - 3,395 1,418 1,142 Current liabilities Bank borrowings - loans & overdrafts 692 236 448 Debtor backed working capital 742 593 935 Trade and other payables 2,532 1,326 1,436 Current tax liabilities 348 6 33 4,314 2,161 2,852 Total liabilities 7,709 3,579 3,994 Total equity and liabilities 11,716 4,516 5,333CEPS PLC

Consolidated Cash Flow Statement

Six months ended 30 June 2007 Unaudited (restated) (restated) 6 months to 6 months to 12 months to 30 June 30 June 31 December 2007 2006 2006 ‚£'000 ‚£'000 ‚£'000 Cash flow from operating activities Cash generated from operations 650 410 450 Tax received - - 10 Interest paid (125) (52) (106) Net cash generated from operations 525 358 354 Cash flow from investing activities Purchase of property, plant and (11) (80) (89)equipment Purchase of computer software and (7) - -website development Purchase of subsidiary undertakings (1,940) - - Payment of deferred consideration - - (20)

Net cash used in investing activities (1,958) (80) (109)

Cash flow from financing activities Proceeds from issue of Ordinary share 2,317 - capital Repayment of bank loans (245) (142) (262) Repayment of capital element of hire (58) - (4)purchase agreements Net cash generated from/(used in) 2,014 (142) (266)financing activities

Net increase/(decrease) in cash and cash 581 136 (21) equivalents

Cash and cash equivalents at beginning (118) (97) (97) of period

Cash and cash equivalents at end of 463 39 (118)period Cash flows from operating activities The reconciliation of operating profit to cash flows from operating activities is as follows: Operating profit for the period 533 153 385 Adjustments for: Depreciation charge 124 51 110 Difference between pension charge and (36) (36) (71)cash contribution Operating profit before changes in 621 168 424working capital and provisions Movement in provisions - - (8) Increase in inventories (71) (67) (237) Decrease/(increase) in trade and other 220 124 (382)receivables

(Decrease)/increase in trade and other (120) 185 653 payables

Cash generated from operations 650 410 450 Cash and cash equivalents Cash at bank and in hand 463 39 35 Bank overdrafts repayable on demand - - (153)(unsecured) 463 39 (118)Accounting PoliciesBasis of preparation

The Half-Yearly Report does not constitute statutory accounts as defined within the Companies Act 1985 and has not been audited.

The Half-Yearly Report has been prepared under the historical cost convention and in line with the requirements of the AIM rules. The Directors have not adopted the requirements of IAS34 'Interim Financial Reporting' in preparing this Report.

The principle accounting policies applied in the preparation of the consolidated Half-Yearly Report are set out below. These policies have been applied consistently to all periods presented, unless otherwise stated.

These are the first set of half-yearly financial statements since the adoption of International Financial Reporting Standards (IFRS) and have been prepared in accordance with IFRS issued by the International Accounting Standards Board (IASB) and International Financial Reporting Interpretations Committee's (IFRIC) interpretations as adopted by the European Union, applicable as at 30 June 2007, and those parts of the Companies Act 1985 applicable to companies reporting under IFRS. In accordance with EU legislation, the Group's first annual financial statements will be prepared for the year ended 31 December 2007.

This is the Group's first consolidated Half-Yearly Report and IFRS 1 - "First-time Adoption of International Financial Reporting Standards" - has been applied. The comparative information has been restated from the Group's previously published accounts for 2006 prepared under UK GAAP, to comply with IFRS. The Group's date of transition to IFRS was 1 January 2006 and reconciliations between IFRS and UK GAAP of the previously reported equity at 1 January 2006 and 31 December 2006 and of the profit for the year ended 31 December 2006 are presented in note 5.

The audited UK GAAP statutory accounts for the year ended 31 December 2006, upon which an unqualified audit opinion was given, have been delivered to the Registrar of Companies.

The Group has taken advantage of the exemption not to produce a Company Income Statement.

First time adoption

The procedures for first time adoption of IFRS, that the Group must follow, are set out in IFRS 1. The general principle is that all IFRS standards be retrospectively applied. However IFRS 1 includes optional exemptions and mandatory exceptions relating to retrospective applications. The most significant of these that impact the Group are as follows:

a) Business combinations - The Group has elected not to apply IFRS 3 to business combinations that occurred prior to the transition date of 1 January 2006.

b) Share based payments - The Group has elected not to apply IFRS 2 to share options and warrants granted prior to 7 November 2002 and, as this relates to all current awards, the results have not been affected. This is consistent with the previous UK GAAP treatment.

c) Fair value or revaluation as deemed cost - The Group has elected not to fair value selective items of property, plant and equipment at the date of transition.

Basis of Consolidation

The Consolidated Income Statement and Balance Sheet include the financial statements of the Company and its subsidiary undertakings up to 30 June 2007. The results of subsidiaries sold or acquired are included in the Consolidated Income Statement up to, or from, the date control passes. Intra group sales and profits are eliminated fully on consolidation.

On acquisition of a subsidiary, all of the subsidiary's assets and liabilities that exist at the date of acquisition are recorded at their fair values reflecting their condition at that date. All changes to these assets and liabilities, and the resulting gains and losses that arise after the Group has gained control of the subsidiary are credited or charged to the post acquisition Income Statement.

Revenue recognition

Revenue comprises the invoiced value of goods sold (recognised on despatch or transfer of substantial risks and rewards where different), excluding VAT.

Property, plant and equipment

Property, plant and equipment is stated at initial cost, including expenditure that is directly attributable to the acquired item, less accumulated depreciation and impairment losses.

Depreciation is calculated on a straight line basis over the deemed useful life of an asset and is applied to the cost less any residual value. The asset classes are depreciated over the following periods:

Plant and machinery, tools and moulds - Between 5 and 10 years, or over the period of the contract

Motor vehicles - 5 years

Leasehold property improvements - Over the term of the lease

The useful life, the residual value and the depreciation method is assessed annually.

The carrying value of the property, plant and equipment is compared to the higher of value in use and the pre-tax realisable value. If the carrying value exceeds the higher of the value in use and pre-tax realisable value the asset is impaired and its value reduced by charging additional depreciation to the Income Statement.

Intangible assetsa) Goodwill

Goodwill is recognised to the extent that it arises through a business combination. In respect of business combinations that have occurred since 1 January 2006, goodwill represents the difference between the cost of the acquisition and the fair value of net identifiable assets acquired. In respect of business combinations prior to this date, goodwill is included on the basis of its deemed cost, which represents the amount recorded under previous GAAP. The classification and accounting treatment of business combinations that occurred prior to 1 January 2006 have not been reconsidered in preparing the Group's opening IFRS Balance Sheet.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to appropriate cash generating units (those expected to benefit from the business combination) and is no longer amortised but is tested for impairment.

b) Computer software and websites

Non-integral computer software purchases are capitalised at cost. These costs are amortised over their estimated useful lives (between 3 and 10 years). Costs associated with implementing or maintaining computer software programmes are recognised as an expense as incurred.

Impairment of intangible assets

Assets that have an indefinite useful life are not subject to amortisation but are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Any impairment losses are not reversed.

Inventories

Inventories are valued at the lower of cost and net realisable value. Raw materials are valued on a first in first out basis at net invoice values charged by suppliers. The value of work in progress and finished goods includes the direct cost of materials and labour together with an appropriate proportion of factory overheads.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, short term bank deposits held at call, other short term highly liquid investments with an original maturity of less than three months, and bank overdrafts. Bank overdrafts are shown current liabilities as borrowings. All are carried at cost in the Balance Sheet.

Deferred taxation

Full provision is made for deferred taxation on all temporary differences existing at the balance sheet date with certain limited exceptions. Temporary differences are the difference between the carrying value of an asset or liability and its tax base. However deferred tax is not recognised on the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination or at the time of the transaction affecting neither accounting profit nor taxable profit, or when the Group can control the timing of the reversal of temporary timing differences arising on investments and that it is improbable that reversal will occur in the foreseeable future.

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be generated enabling the utilisation of the temporary timing differences.

Foreign currencies

The results are recorded in Sterling which is deemed to be the functional currency of the Group, the Company and all its subsidiaries.

Foreign currency transactions are expressed in Sterling at the rates of exchange ruling at the date of the transaction, and if still in existence at the year end the balance is retranslated at the rates of exchange ruling at the Balance Sheet date. Differences arising from changes in exchange rates during the year are taken to the Income Statement.

Pensions

Defined benefit pension costs are recognised in the Income Statement and the Statement of Recognised Income and Expense. The full annual actuarial gain or loss is recognised in the Statement of Recognised Income and Expense. Contributions to the defined contribution schemes are charged to the Income Statement as incurred.

Operating leases

The annual costs of operating leases are charged to the Income Statement as incurred.

Finance leases

For leases where a significant portion of the risks and rewards of ownership is obtained or where legal title is to pass to the Group the assets are capitalised at cost in the Balance Sheet and depreciated over their expected useful economic lives. The interest element of the rental obligation is charged to the income statement over the period of the lease and represents a constant proportion of the balance of capital repayment outstanding.

Minority interests

Minority interests represent the interest of shareholders in subsidiaries which are not wholly owned by the Group.

Notes to the financial information

1. Segmental analysis

All activities are classed as continuing.

a) Primary reporting format - Business segments

i) Results by segment

Unaudited 6 months to 30 June

Freidman's Davies Odell Sunline Group (restated) (restated) (restated) 2007 2006 2007 2006 2007 2007 2006 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Revenue 1,465 1,374 2,468 2,152 3,255 7,188 3,526 Segmental result 184 145 220 156 458 862 301 Depreciation (17) (13) (39) (38) (68) (124) (51)charge Abortive (71) -acquisition costs Group costs (134) (97) Interest expenses (125) (52) Profit before 408 101taxation Taxation (77) (6) Profit for the 331 95period

ii) Assets and liabilities by segment

Unaudited as at 30 June

Segment assets Segment liabilities Segment net assets (restated) (restated) (restated) 2007 2006 2007 2006 2007 2006 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 CEPS Group 225 85 (29) (39) 196 46 Freidman's 2,903 2,794 (2,012) (2,064) 891 730 Davies Odell 1,964 1,637 (1,421) (1,476) 543 161 Sunline 6,624 - (4,247) - 2,377 - Total - Group 11,716 4,516 (7,709) (3,579) 4,007 937

iii) Non-cash expenses and capital expenditure

Other than as stated above there were no significant non-cash expenses.

Unaudited 6 months to 30 June

Capital expenditure 2007 2006 ‚£'000 ‚£'000 CEPS Group 7 - Freidman's 5 80 Davies Odell 3 - Sunline 3 - Total - Group 18 80

b) Secondary reporting format - Geographical segments

The United Kingdom is the source of turnover, operating profit and is the principal location of the assets of the Group. The Group information provided above therefore also represents the geographical segmental analysis.

2. Earnings per share

Basic earnings per share is calculated on the profit after taxation for the period attributable to equity holders of the Company of ‚£270,000 (2006, ‚£ 88,000) and on 7,211,618 (2006 restated: 3,563,828) ordinary shares, being the weighted number in issue during the period.

Diluted earnings per share is calculated on the weighted number of ordinary shares in issue adjusted to reflect the potential effect of the exercise of share warrants. No adjustment is required in either period because the fair value of warrants was below the exercise price.

3. Acquisition

In February 2007 the Company, through Sunline Direct Mail (Holdings) Limited (SDMH), acquired the entire issued share capital of Sunline Direct Mail Limited (SDM), a supplier of poly wrapping and associated services to the direct mail market, for an initial consideration of ‚£3,800,000. The Company acquired 80% of SDMH, the remaining 20% being owned by the managing director of SDM.

The initial consideration was satisfied by a cash payment of ‚£3,450,000 and the issue of shares and loan notes in SDMH to the value of ‚£350,000. The cash payment was funded by non-recourse bank finance of ‚£2,000,000 and subscriptions by the Company of ‚£80,000 for equity, ‚£520,000 for preference shares and ‚£ 850,000 for loan stock. Deferred consideration of up to a maximum of ‚£500,000 will be payable dependent on the future trading performance of SDM.

Since acquisition SDMH has contributed revenue of ‚£3,255,000 and operating profit of ‚£390,000 to the Group results. Had Sunline been acquired at 1 January 2007, the first day of the financial year, it is anticipated that it would have contributed revenue of ‚£3,835,000 and operating profit of ‚£438,000.

Details of the acquisition of SDM by SDMH are as follows:

Book Provisional values fair values ‚£'000 ‚£'000 Intangible fixed assets (goodwill on a previous 473 -acquisition) Tangible fixed assets 1,014 1,014 Inventories 64 64 Debtors 1,522 1,522 Corporation tax (238) (238) Creditors (937) (937) Deferred tax liability (173) (173) Net assets acquired 1,725 1,252 Purchased goodwill 3,794 Consideration 5,046 Analysis of consideration: Cash 2,000 Cash acquired (208) Finance leases 256 Share capital: Group 600 Share capital: minority 150 Loan stock: Group 850 Loan stock: minority 200 Deferred consideration 500 Acquisition expenses 698 5,046

Purchased goodwill reflects the value of the reputation of SDM and the loyalty of its customer base. As it is not considered to be possible to attribute estimated fair values to either of these factors, they have not been recognised as separately identifiable intangible assets.

4. Share consolidation and fund raising

On 12 February 2007 shareholders approved a share consolidation on the ratio of 50 existing ordinary shares of 0.1p each for one new ordinary share of 5p each and a placing to raise ‚£2,375,000, before expenses of ‚£58,000, by the issue of 4,750,000 placing shares at 50p per share (equivalent to 1p per share prior to the share consolidation). The proceeds were used to acquire a majority interest in SDMH and to strengthen the Group's Balance Sheet. The investors included members of the concert party detailed in the circular sent to shareholders on 11 January 2007.

5. Explanation of the transition from UK GAAP to IFRS

These half-yearly financial statements are the first set to be prepared under IFRS and as such the following disclosures are required in the year of transition. The date of transition is 1 January 2006.

i) Reconciliation of profit for the period

6 months to 12 months to 30 June 31 December 2006 2006 ‚£'000 ‚£'000 Profit under UK GAAP 55 357 Amortisation of goodwill 40 80 Profit under IFRS 95 437

ii) Reconciliation of equity at 1 January 2006

UK GAAP Transition IFRS Notes Adjustment Assets ‚£'000 ‚£'000 ‚£'000 Non-current assets Property, plant and 259 - 259 equipment Intangible assets 1,529 - 1,529 Deferred tax asset - 202 202 b 1,788 202 1,990 Current assets Inventories 1,087 - 1,087 Trade and other receivables 1,411 - 1,411 Current tax recoverable 1 - 1 Deferred tax asset 16 - 16 Cash and cash equivalents 24 - 24 2,539 - 2,539 Total assets 4,327 202 4,529 Equity

Capital and reserves attributable to equity holders of the Company

Called up share capital 178 - 178 Share premium 676 - 676 Retained earnings (138) - (138) 716 - 716 Minority interest in equity 127 - 127 Total equity 843 - 843 UK GAAP Transition IFRS Notes Adjustment Liabilities ‚£'000 ‚£'000 ‚£'000 Non-current liabilities Bank borrowings - loans & 878 - 878 overdrafts Retirement benefit 471 202 673 b liabilities Provisions 32 - 32 1,381 202 1,583 Current liabilities Bank borrowings - loans & 366 - 366 overdrafts Debtor backed working 416 - 416 capital Trade and other payables 1,311 - 1,311 Provisions 10 - 10 2,103 - 2,103 Total liabilities 3,484 202 3,686 Total equity and 4,327 202 4,529 liabilities

iii) Reconciliation of equity at 31 December 2006

Assets Non-current assets Property, plant and 279 - 279 equipment Intangible assets 1,449 80 1,529 a Deferred tax asset - 155 155 b 1,728 235 1,963 Current assets Inventories 1,324 - 1,324 Trade and other receivables 1,793 - 1,793 Deferred tax asset 218 - 218 Cash and cash equivalents 35 - 35 3,370 - 3,370 Total assets 5,098 235 5,333 Equity Capital and reserves attributable to equity holders of the Company Called up share capital 178 178 Share premium 676 676 Retained earnings 267 80 347 1,121 80 1,201 Minority interest in equity 138 138 Total equity 1,259 80 1,339 UK GAAP Transition IFRS Notes Adjustment Liabilities ‚£'000 ‚£'000 ‚£'000 Non-current liabilities Bank borrowings - loans & 566 - 566 overdrafts Trade and other payables 27 - 27 Retirement benefit 362 155 517 b liabilities Provisions 32 - 32 987 155 1,142 Current liabilities Bank borrowings - loans & 448 - 448 overdrafts Debtor backed working 935 - 935 capital Trade and other payables 1,436 - 1,436 Current tax liabilities 33 - 33 2,852 - 2,852 Total liabilities 3,839 155 3,994 Total equity and 5,098 235 5,333 liabilities

iv) Notes to transition adjustments

a) IAS 38, Intangible assets, requires that goodwill is no longer amortised, but instead is subject to an annual impairment review. In compliance, the goodwill amortisation charged under UK GAAP during the year ended 31 December 2006 has been reversed. The Group has elected, as permitted under IFRS 3, Business combinations, not to retrospectively restate goodwill relating to acquisitions prior to 1 January 2006 and therefore the UK GAAP goodwill balance at 31 December 2005 has been included in the transition IFRS balance sheet and is no longer amortised.

b) IAS 19, 'Employee benefits', requires the pension liability to be disclosed on the face of the balance sheet, gross of any recognised deferred tax. As a result the deferred tax asset relating to the pension liability has been transferred to non-current assets.

6. AIM Compliance Committee

In accordance with AIM Rule 31 the Company is required to have in place sufficient procedures, resources and controls to enable its compliance with the AIM Rules; seek advice from its nominated adviser ("Nomad") regarding its compliance with the AIM Rules whenever appropriate and take that advice into account; provide the Company's Nomad with any information it requests in order for the Nomad to carry out its responsibilities under the AIM Rules for Companies and the AIM Rules for Nominated Advisers; ensure that each of the Company's directors accepts full responsibility, collectively and individually, for compliance with the AIM Rules; and ensure that each director discloses without delay all information which the Company needs in order to comply with AIM Rule 17 (Disclosure of Miscellaneous Information) insofar as that information is known to the director or could with reasonable diligence be ascertained by the director.

In order to ensure that these obligations are being discharged, the Board has established a committee of the Board (the "AIM Committee"), chaired by Richard Organ, a non-executive director of the Company.

Having reviewed relevant Board papers, and met with the Company's Executive Board and the Nomad to ensure that such is the case, the AIM Committee is satisfied that the Company's obligations under AIM Rule 31 have been satisfied during the period under review.

7. Distribution of the Half-Yearly Report

A copy of the Half-Yearly Report is being circulated to shareholders. Further copies will be available to the public from the Company Secretary at the Company's registered address at 11 George Street, Bath BA1 2EH or from the Group website, www.cepsplc.com.

Contact:-Peter Cook, DirectorCEPS PLCTel: 07788 752 560

Ross Andrews, Nominated Adviser

City Financial Associates Limited

Tel: 020 7492 4777