Cloudcoco Regulatory News (CLCO)

20 Dec 2005 07:01

Glen Group PLC20 December 2005 Glen Group plc ("Glen" or "the Group") Announcement of Final Results for the year ended 30 September 2005 Announcement of advanced negotiations to acquire an IT value added reseller The Board of Glen today announces its final results for the year ended 30September 2005 and confirms that it is currently at an advanced stage ofnegotiations to acquire an IT value added reseller. The size of this proposed transaction is such that it will be defined as areverse takeover and accordingly will be subject, amongst other things, to theapproval of the Glen shareholders. As an integral part of this proposedtransaction there will be a placing to raise up to £2.5m for the enlarged group,marketing for which will commence in early January. As a result the Board hasrequested that the trading of the shares in Glen should be suspended pendingfull details of the proposed transaction being sent to Glen shareholders andhave reached agreement with AIM for this to happen with immediate effect. The expectation is that the proposed transaction, fundraising and associateddocumentation will be agreed and announced by 31st January 2006. Full details ofthe transaction will be disclosed to the shareholders of Glen in the AdmissionDocument for the enlarged Group, which will contain the notice of EGM which isexpected to be held during February 2006 and at which shareholder approval forthe proposed transaction will be sought. Following the posting of the AdmissionDocument, it is expected that the suspension in trading of shares in Glen willbe lifted pending completion of the proposed transaction. Application will bemade for the shares of Glen to be re-admitted to trading on AIM on completion ofthe proposed transaction. The Board of Glen believe that the target company is a company with a potentialfor significant growth, organically and by further acquisition, and recognisethat its management team has the skills and experience necessary to achieve thisobjective within its market niche. The Group will make further announcements in due course.The highlights of our final results are as follows: 2005 2004 % IncreaseTurnover £538,397 £373,848 44.0%Gross Profit £242,368 £129,978 86.5%Loss before tax (£571,679) (£205,049) 178.8%Loss per share in pence per share 1.18 0.82 43.9%Net cash £162,991 (£45,717) 456.5% Key points • Strong growth in second half performance with sales up nearly 100% over first half, and sales up 44% over the year as a whole. • Gross profit up 86.5% compared to 2004. • Loss for year reflects increased costs of public company status and the costs associated with expanding the sales team. • Group well placed to grow through further acquisitions and through organic growth. Eric Hagman CBE, Chairman of Glen Group, commented: "We have today announced that we are in advanced negotiations to acquire an ITvalue added reseller which under the AIM rules would be regarded as a reversetakeover, subject to shareholder approval. If concluded, this would be asignificant step in our ambitions to grow into a powerful player in the addedvalue information technology and communications sector. This potential acquisition will allow us to build a more significant platformfrom which we can build the business and I would like to thank the team fortheir efforts during the last year and I look forward to the announcement offurther successes over the next year." 20 December 2005 Enquiries:Glen Group plcGraham J Duncan, Chief Executive Officer - 0845 119 2110College HillAlex Walters - 0207 457 2020 Glen Group plc ("Glen" or "the Group") Announcement of Final Results for the year ended 30 September 2005 CHAIRMAN'S STATEMENTIntroductionI am delighted to present the first annual results for Glen Group plc ("theGroup") since its incorporation in October 2004 and the subsequent flotation onAIM in December 2004, just one year ago. This period has been one of significantprogress in which our operating company, Glen Communications Limited("Communications"), has expanded its sales and support capability to now coveran area from Scotland to the Midlands.Glen Communications Limited is positioned as a value added reseller ofintegrated IT and communications focused on managing a wide range of productsand services for SMEs in the United Kingdom. The ethos of the Group is focusedon the concept of a one-stop-shop for SMEs and it is positioned at the customerend of the supply chain. ResultsIn the first half year, we achieved a turnover of £182,421. I am pleased toreport that in the second half the turnover was £355,976 taking the year to£538,397. This increase, close to 100 per cent., reflects the success of ourenlarged sales team led by Craig Saunderson who we recruited in May 2005. Theturnover for 2005 also compares well against our turnover of £373,848 for thewhole of 2004. Our gross profit for 2005 of 45.02 per cent. also compares wellagainst the 2004 figure of 34.77 per cent. Our loss for 2005 was £571,679against £205,049 for 2004. However these two figures do not stand up tocomparison as the 2005 loss reflects the materially higher costs of the Group asa public company. Fuller details are contained in the Chief Executive Officer'sReport. FundingAs announced in my interim statement, we raised a further £300,000 before costs,in June 2005 to give us additional working capital and since the year end wehave raised a further £250,000 before expenses, again to be used as furtherworking capital as we seek to move the business deeper into the importantEnglish market. OutlookHaving now worked with the business model we have adopted, we are comfortablethat it can deliver the results we seek. The key is to ensure that we canresource the right people across all levels of the Group and develop the peoplewe have so that they can deliver the service and skill set that customersdemand. Inevitably, this takes time to develop. Our entire business philosophyis based around the customer experience, from the professional sale throughimplementation, training and after sale care and support. I would draw your attention to Note 30 of our results which gives more detailconcerning the advanced negotiations to acquire an IT value added resellerannounced today. Having now been with the Group for one year, I am impressed by the enthusiasmand commitment contained in its people. The development of the Group to date is in no small way down to the vision, anddetermination, of the Group Chief Executive, Graham J Duncan. I would like tothank him and the team for their efforts during the last year and I look forwardto the announcement of further successes over the next year.Eric M Hagman CBE Chairman CHIEF EXECUTIVE OFFICER'S REPORTBackgroundThe flotation of Glen Group plc ("the Group") in December 2004 was the firststep of a journey which started in February 2002 with the creation of GlenCommunications Limited ("Communications"). Communications was started from azero base in a small industrial unit in Dalkeith, near Edinburgh with theintention of building a value added reseller in the telecommunications space.With that intention, we moved to hire a single sales executive, and a secondindividual with a customer support and marketing background, to move thebusiness forward. Throughout 2002 and 2003 we made good progress, with verylimited resources, recognising that we had to develop a sales platform whichcould deliver sales opportunities and open doors for our expanding set ofproducts and services. During 2003 we also moved to create an IT skill setwithin Communications and eventually acquired Soluis IT Limited in May 2004.This acquisition recognised the importance of IT in the changing world oftelecommunications, and set the scene for our future direction. The year ended 30 September 2005 has seen significant expansion following thesuccessful admission of our ordinary shares to trading on AIM in December 2004.Coming onto the AIM market as a very small company creates both opportunitiesand challenges. The public company has given us greater exposure but thechallenge is to grow, and to grow quickly. This requires an acquisition strategyas well as an organic one. Our ability to grow is dependent on the quality of our people. We currently havea sales group of nine and over time will seek to expand that team. The key tosuccess is based on the productivity of each member of the sales team. In thisrespect, we instil in them a need to approach the sale in a professional way andgive them a measurable set of tools to achieve their personal objectives. Since expanding the team, we have fine tuned both our skill set and the productsand services that we deliver. In the SME market we recognise that customers willnot necessarily buy the complete solution from ourselves. We therefore lead oursales approach with specific products and services and concentrate specificallyon the following: (a) IT ServicesThe Group offers a range of IT solutions including server installationmanagement and support, router deployment and management, and desk topinstallation support and management. Other IT services include maintenance andsupport for client's IT infrastructure, virus protection and monitoringsolutions. The Group also advises clients on telecommunication bandwidth requirements, suchas broadband, and network access and security, including wireless access andVPN. The Group provides connectivity in conjunction with various suppliers whoprovide ISP services across the UK. (b) MobileMobile voice and data is currently the single largest revenue stream within thegroup. The Group offers an account management service that manages customers' mobileaccounts with any of the five mobile networks in the UK. Glen Communications hasalso recently become a channel partner for a Vodafone service provider bringinganother dimension to the portfolio. The Group has developed a particular expertise in the deployment andprovisioning of "Blackberry(TM)" email solutions to the business market. (c) Broadband Voice (VoIP)Broadband voice is a step-change technology that allows voice to travel overdata networks. The Directors believe that this has profound implications fortelecommunications costs and will help drive down costs and expand value-addedservices over the next few years. As the technology develops, the Group is introducing VoIP to its customers andpotential customers in a controlled way by first introducing a hosted VoIPservice which delivers many value added features to the customer without theneed for a PBX. (d) Maximizer(TM)Maximizer(TM) is a CRM solution aimed at the SME and small corporate market andduring the year we were pleased to sign a reseller agreement with Maximizer(TM). Business information particularly customer information is a valuable asset andit is important to use this information to ensure that a business grows. GlenCommunications has a team of specialist sales and technical people who areexperienced in discussing and specifying tailored CRM systems usingMaximizer(TM). We were also delighted that Glen Communications was awarded the Maximiser(TM)initiated channel partner "Best website marketing award for 2005." ResultsTurnover for the year was £538,397 with over 80 per cent. coming from our IT(including Maximizer(TM)) and mobile activities. Our gross profit of 45.02 percent. has held up very well and we are pleased with the second half performance,in particular, as the first half did not benefit from the increased activitywhich started to build only after the appointment of our Head of Sales in May2005. At our year end our Head of Sales had been in place for less than fivemonths so I am particularly pleased with the progress over that period. Our operating costs, totalling £804,654, include £215,962 of costs directlyrelating to the holding company. The holding company costs did not exist theprevious year. The holding company costs cover a ten month period from 1December 2004 and they are a measure of the ongoing costs of our AIM listing,including the costs of the Group board. Excluding these costs, the operatingcompany incurred operating costs of £588,692 against £333,994 the previous year.The increased costs are predominantly salary based as we increase our headcount, particularly in sales. Bringing people into the business creates a costbase ahead of any sales activity as they have to be recruited and trained whichtakes time. Once prospective clients are identified, it takes further time toundertake the consultancy, produce and agree the client proposal and, hopefully,close the sale. We target individual members of our sales team on a monthly basis which requiresthem each to deliver a minimum gross profit in the month, with a further highertarget to aim at. The business model in this respect, is therefore relativelysimple as we can calculate what productivity we need as a whole to deliver anoverall Group profit. Working to achieve this is our key objective. Overall, the Group has incurred an operating loss of £562,286 compared to£204,016. There is no tax charge for the year and the Group continues to haveunrelieved tax losses available. Cash and borrowingsAt 30 September 2005 the Group had cash resources of £211,160. The Group alsohad an overdraft of £48,169 giving Group net cash of £162,991. The Group had a term loan outstanding at 30 September 2005 amounting to £78,516,and sums due to Directors and a related party of a Director, totalling £40,000.The latter sums were repaid in early December in accordance with the terms ofthe loans. Our overdraft facility, of £50,000, has recently been renewed and isavailable to the Group until 31 December 2006. FundingThe flotation on 1 December 2004 raised £750,000, before costs. A further£300,000 was raised in June 2005, again before costs. The combined costs ofthese fund raisings, including the costs of the AIM admission, totalled£242,549, and this sum has been deducted from the share premium account. Sincethe year end we have raised a further £250,000 before costs to boost our workingcapital. Outlook and opportunitiesSince coming to the market the Board have stated that we intend building valueover time through organic growth and by acquisition. The latter is veryimportant to our growth plans. We look forward to developing this strategy and doing what we are good at,namely adding value for our clients by providing them with a professionalservice. Graham J DuncanChief Executive Officer PRINCIPAL ACCOUNTING POLICIES The financial information set out within this preliminary announcement does notconstitute the company's statutory financial statements for the year ended 30September 2005 or the year ended 30 September 2004 but is derived from thosefinancial statements. Those financial statements have been reported on by theCompany's auditors. The report of the auditors was unqualified and did notcontain a statement under S.237 (2) or (3) Companies Act 1985. The statutoryfinancial statements of the subsidiary, Glen Communications Limited, for theyear ended 30 September 2004 have been delivered to the Registrar of Companies.The statutory financial statements for the year ended 30 September 2005 will bedelivered to the Registrar of Companies following the company's Annual GeneralMeeting. Basis of accountingThe financial statements have been prepared under the historical costconvention, and in accordance with applicable accounting standards.The principal accounting policies of the company and its subsidiaries haveremained unchanged from the previous year and are set out below. Basis of preparationDuring the year the group carried out a corporate restructuring including theintroduction of a new holding company Glen Group plc, incorporated on 14 October2004. On 15 November 2004, the company acquired the entire issued share capitalof its subsidiary, Glen Communications Limited, for a consideration of £750,000by way of a share for share exchange. The results shown in the profit and loss account are pro-forma, incorporatingthe results of Glen Communications Limited ("Communications") for the periodfrom 1 October to 14 November 2004 and the consolidated results of Glen Groupplc ("Group") for the period from 15 November 2004 to 30 September 2005. Thecomparative figures for the year ended 30 September 2004 are extracted from theaudited results of Communications for that year. The balance sheet as at 30September 2005 is the consolidated balance sheet of Group. The comparativeconsolidated balance sheet at 30 September 2004 is pro forma and is derived fromthe audited balance sheet of Communications. Basis of consolidationThe financial information includes the financial information of the Company andits subsidiaries. The combination of Glen Communications Limited("Communications") and Glen Group plc ("Group") qualifies for merger accountingwhich aggregates the results of Group and Communications without creating anyacquisition goodwill. As a result the profit and loss account shown in theconsolidated balance sheet represents the aggregation of accumulated profits andlosses since both companies were incorporated. Merger accountingWhere merger accounting is used, the investment is recorded in the company'sbalance sheet at the nominal value of the shares issued together with the fairvalue of any additional consideration paid. In the group financial statements, merged subsidiary undertakings are treated asif they had always been a member of the group. The results of such a subsidiaryare included for the whole period in the year it joins the group. Thecorresponding figures for the previous year include its results for that period,the assets and liabilities at the previous balance sheet date and the sharesissued by the company as consideration as if they had always been in issue. Anydifference between the nominal value of the shares acquired by the company andthose issued by the company to acquire them is taken to reserves. GoodwillPositive goodwill arising on acquisitions is capitalised, classified as anIntangible Asset on the balance sheet and amortised on a straight line basisover its useful economic life, which is estimated at 10 years. It is reviewedfor impairment at the end of its first full financial year following theacquisition and in other periods if events or changes in circumstances indicatethat the carrying value may not be recoverable. If a subsidiary is subsequentlysold, any goodwill arising on acquisition that has not been amortised throughthe profit and loss account is taken into account in determining the profit orloss on sale. The directors consider the economic life of goodwill based on eachacquisition made by the company. TurnoverTurnover is the total amount receivable by the company in the ordinary course ofbusiness with outside customers for goods supplied as a principal and forservices provided, excluding VAT and trade discounts. Turnover from mobile commissions is recognised when the customers are connectedto the relevant network. Turnover from information technology services arebilled to clients in accordance with agreed terms, in line with performance ofthe contract. Turnover from the sale of pre-paid phone cards is recognised whenthe cards are used, excluding VAT and trade discounts. Deferred taxationDeferred taxation is recognised on all timing differences where the transactionsor events that give the company an obligation to pay more tax in the future, ora right to pay less tax in the future, have occurred by the balance sheet date.Deferred tax assets are recognised when it is more likely than not that theywill be recovered. Deferred tax is measured using rates of tax that have beenenacted or substantively enacted by the balance sheet date. Foreign currenciesTransactions in foreign currencies are translated at the exchange rate ruling atthe date of the transaction. Monetary assets and liabilities in foreigncurrencies are translated at the rates of exchange ruling at the balance sheetdate. When exchange differences result from the translation of foreign currencyborrowings raised to acquire foreign assets they are taken to reserves andoffset against the differences arising from the translation of those assets. Allother exchange differences are dealt with through the profit and loss account. Fixed assetsAll fixed assets are initially recorded at cost. DepreciationDepreciation is calculated so as to write off the cost of an asset, less itsestimated residual value, over the useful economic life of that asset asfollows: Plant & Machinery - over 3 years Fixtures & Fittings - over 3 years MotorVehicles - over 3 years Equipment - over 3 years InvestmentsInvestments are included at cost less amounts written off. StocksStocks are valued at the lower of cost and net realisable value, after makingdue allowance for obsolete and slow moving items. Operating lease agreementsRentals applicable to operating leases where substantially all of the benefitsand risks of ownership remain with the lessor are charged against profits on astraight line basis over the period of the lease. Retirement benefitsThe group operates a defined contribution pension scheme. Pension costs arecharged to the profit and loss account in the period to which they relate. Financial instrumentsFinancial assets are recognised in the balance sheet at the lower of cost andnet realisable value. Provision is made for diminution in value whereappropriate. Income and expenditure arising on financial instruments is recognised on theaccruals basis, and credited or charged to the profit and loss account in thefinancial period to which it relates. CONSOLIDATED PROFIT AND LOSS ACCOUNT 2005 2004Year ending 30 September 2005 Note £ £Turnover 1 538,397 373,848Cost of sales 296,029 243,870 -------- ------Gross profit 242,368 129,978Other operating income and charges 2 804,654 333,994 -------- ------Operating loss 3 (562,286) (204,016)Interest receivable 6,716 110Interest payable and similar charges 6 (16,109) (1,143) -------- ------Loss on ordinary activities before taxation (571,679) (205,049)Tax on loss on ordinary activities - - -------- ------Loss for the financial year, carried forward (571,679) (205,049) -------- ------Basic loss per share (pence) 7 1.18 0.82 -------- ------ During the period the group carried out a corporate restructuring including theintroduction of a new holding company. The profit and loss account has beenprepared using merger accounting and is presented on a pro forma basis as if thegroup has been in existence throughout both the current and the prior periods. The consolidated profit and loss account from the date of incorporation of thenew holding company is given in note 27. All of the activities of the group are classed as continuing.The company has no recognised gains or losses other than the results for theyear as set out above.The accompanying accounting policies and notes form part of these financialstatements. CONSOLIDATED BALANCE SHEET 2005 2004As at 30 September 2005 Note £ £Fixed assets 9 50,317 11,529Tangible assetsIntangible assets 10 17,079 18,977 --------- ------ 67,396 30,506 --------- ------Current assets 12 10,113 8,236StocksDebtors 13 208,626 62,858Cash at bank and in hand 211,160 26 --------- ------ 429,899 71,120Creditors: amounts falling due within one year 14 346,809 143,788 --------- ------Net current assets/(liabilities) 83,090 (72,668) --------- ------Total assets less current liabilities 150,486 (42,162) --------- ------Creditors: amounts falling due after 15 58,516 101,730more than one year --------- ------ 91,970 (143,892) --------- ------Capital and reserves 18 600,000 250,000Called-up equity share capitalShare premium account 19 957,541 500,000Other reserves 20 (101,914) (101,914)Profit and loss account 21 (1,363,657) (791,978) --------- ------Shareholders' funds/(deficiency) 22 91,970 (143,892) --------- ------ The accompanying accounting policies and notes form part of these financialstatements COMPANY BALANCE SHEET 2005As at 30 September 2005 Note £ -------Fixed assets 11 1,550,000Investments ------- 1,550,000 -------Current assets 13 11,590DebtorsCash at bank and in hand 210,081 ------- 221,671Creditors: amounts falling due within one year 14 130,092 -------Net current assets 91,579 -------Total assets less current liabilities 1,641,579 -------Capital and reserves 18 600,000Called-up equity share capitalShare premium account 19 957,541Profit and loss account 21 84,038 -------Shareholders' funds 22 1,641,579 ------- The accompanying accounting policies and notes form part of these financialstatements CONSOLIDATED CASH FLOW STATEMENT 2005 2004Year ending 30 September 2005 £ £ £ £RECONCILIATION OF OPERATING LOSS TO (562,286) (204,016)NETCASH OUTFLOW FROM OPERATINGACTIVITIESOperating loss from continuingactivitiesDepreciation 17,514 6,497Amortisation 1,898 -(Increase)/decrease in stock (1,877) 447Increase in debtors (145,767) (14,504)Increase in creditors 166,596 41,456 -------- ------Net cash outflow from continuingoperating (523,922) (170,120)activitiesCASH FLOW STATEMENT (523,922) (170,120)NET CASH OUTFLOW FROM CONTINUINGOPERATING ACTIVITIESRETURNS ON INVESTMENTS AND 6,716 110SERVICING OF FINANCEInterest receivedInterest paid (16,109) (1,143) --------- --------Net cash outflow from returns on (9,393) (1,033)investments and servicing offinanceCAPITAL EXPENDITURE AND (56,492) (8,175)FINANCIAL INVESTMENTPurchase of tangible fixed assetsSale of tangible fixed assets 190 698 --------- --------Net cash outflow from capital (56,302) (7,477)expenditureand financial investmentFINANCING 1,050,000 55,678Issue of sharesReceipt of bank finance - 100,000Repayment of borrowing (16,486) (5,000)Receipt from/(repayment of) 7,270 (23,528)shareholders loansExpenses paid in connection with (242,459) -share issues --------- --------Net cash inflow from financing 798,325 127,150 -------- ------INCREASE/(DECREASE) IN CASH 208,708 (51,480) -------- ------ CONSOLIDATED CASH FLOW STATEMENT 2004 Cash Flows 2005ANALYSIS OF NET FUNDS/(DEBT) £ £ £Cash 26 211,134 211,160Bank overdraft (45,743) (2,426) (48,169) ------- --------- ------ (45,717) 208,708 162,991 ------- --------- ------Debt (127,730) 9,214 (118,516) ------- --------- ------Net (debt)/funds (173,447) 217,922 44,475 ------- --------- ------ NOTES TO THE FINANCIAL STATEMENTS 1. TurnoverThe turnover and loss before tax are attributable to the one principal activityof the company. An analysis of turnover is given below: 2005 2004 £ £United Kingdom 538,397 373,848 -------- ------2. Other operating income and charges 2005 2004 £ £Administrative expenses 804,654 333,994 -------- ------3. Operating loss 2005 2004Operating loss is stated after charging: £ £Depreciation of owned fixed assets 17,514 6,497Amortisation of goodwill 1,898 -Other operating lease rentals: 15,730 10,892- buildings- office equipment 1,032 672Auditors' remuneration: 9,000 3,800Audit fees:- company- group 8,500 -Non audit fees: - -- company- group 675 - -------- ------ In addition, remuneration paid to the auditors in respect of the flotation,totalling £26,651 has been included within the share premium account. 4. Directors and employeesThe average number of staff employed by the company during the financial yearamounted to: 2005 2004 No NoNumber of management staff 5 2Number of operational staff 12 4 ------ ------Employee numbers include directors. 17 6 4. Directors and employees (Continued)The aggregate payroll costs of the above were: 2005 2004 £ £Wages and salaries 431,197 203,504Social security costs 44,247 22,701Other pension costs 10,675 - -------- ------ 486,119 226,205 -------- ------ Employee costs are stated including directors, but excluding fees payable to E MHagman which are shown in Note 5. 5. DirectorsRemuneration in respect of directors was as follows: 2005 2004 Fees Salaries Pensions Benefits Totals TotalsE M Hagman 18,334 - - 18,334 -G J Duncan - 90,000 9,375 2,936 102,311 60,000P J Ford - 14,167 - 14,167 10,000------------------------------------------------------------------------------ 18,334 104,167 9,375 2,936 134,812 70,000 In 2004 the remuneration of directorsconsisted only of salaries. 6. Interest payable and similar charges 2005 2004 £ £Interest payable on bank borrowing 1,972 1,143Other similar charges payable 14,137 - ----------- ------- 16,109 1,143 ----------- ------- 7. Loss per share 2005 2004 £ £Loss attributable to ordinaryshareholders 571,679 205,049Weighted average number of ordinary shares No Noin issue 48,333,333 25,000,000Loss per share (pence) 1.18 0.82 ----------- ------- FRS 14 requires presentation of diluted EPS to reflect all outstanding shareoptions where their future exercise would decrease net profit or increase netloss per share. For a loss making company with outstanding share options, netloss per share would only be increased by the exercise of out-of-the-moneyoptions. Since it seems inappropriate to assume that option holders would actirrationally and there were no other diluting share issues, diluted EPS has notbeen presented for the year ended 30 September 2005. 8. Tax on loss on ordinaryactivitiesThe tax charge/credit represents 2005 2004 £ £United Kingdom corporation tax at 19% (2004:19%) Total current tax - -Total deferred tax (Note 26) - - ------------------ -------- -----Tax on profit on ordinary - -activities ------------------ -------- ----- Unrelieved tax losses of £1,049,850 remain available to offset against futuretaxable trading profits. See note 26. Factors affecting tax charge for the period. The tax assessed for the period is higher than the standard rate of corporationtax in the UK of 19 per cent.(2004: 19 per cent.). The differences areexplained 2005 2004as follows: £ £Loss on ordinary activities before tax (571,679) (205,049)Loss on ordinary activities multiplied by (108,619) (38,959)standardrate of corporation tax in the UK of 19%(2004: 19%)Expenses not deductible for tax purposes 963 356Capital allowances for the period in excess ofdepreciation (1,963) 1,234Tax losses available to carry forward 109,619 37,369 --------- ------Current tax charge for the period - - --------- ------9. Tangible fixed assets Plant & Fixtures & Motor Equipment Total Machinery Fittings VehiclesGroup £ £ £ £ £ Cost At 1 October 2004 765 2,752 1,489 16,984 21,990Additions 1,360 8,974 - 46,158 56,492Disposals - - - (190) (190)-------------------------------- ------- ------- --------- ------At 30 September 2005 2,125 11,726 1,489 62,952 78,292-------------------------------- ------- --------- ------Depreciation At 1 October 2004 297 1,070 207 8,887 10,461Charge for the year 475 2,015 496 14,528 17,514-------------------------------- ------- ------- --------- ------At 30 September 2005 772 3,085 703 23,415 27,975-------------------------------- ------- ------- --------- ------Net book value At 30 September 2005 1,353 8,641 786 39,537 50,317-------------------------------- ------- ------- --------- ------At 30 September 2004 468 1,682 1,282 8,097 11,529-------------------------------- ------- ------- --------- ------ 10. Intangible fixed assets Group 2005 2004Goodwill £ £Cost 18,977 -At 1 OctoberAdditions - 18,977Disposals - ---------------------------------------- --------- -----At 30 September 18,977 18,977--------------------------------------- --------- -----Amortisation - -At 1 OctoberCharge for the year 1,898 ---------------------------------------- --------- -----At 30 September 1,898 ---------------------------------------- --------- -----Net book value 17,079 18,977At 30 September--------------------------------------- --------- ----- During the year to 30 September 2004 Glen Communications Limited purchased 100per cent. of the issued share capital of Soluis IT Limited. The goodwillreflects the excess of the purchase consideration over the underlying net assetsacquired. 11. Fixed asset investments 2005 2004CompanyInvestment in subsidiaries £ £Cost - -At 1 OctoberAdditions 1,550,000 -Disposals - - --------- ------At 30 September 1,550,000 - --------- ------Net book value 1,550,000 -At 30 September --------- ------ On 15 November 2004 24,999,998 ordinary shares were issued at £0.03 per share inconsideration of the acquisition of the entire issued share capital of GlenCommunications Limited. On 30 September 2005 the company invested £800,000 inGlen Communications Limited. At 30 September 2005, the company held the following: Country Owned by Nature ofCompany of Class of the business registration share companyGlenCommunicationsLimited UK Ordinary 100% Integrated shares communications service providerGlen ProjectManagementLimited UK Ordinary 100% Dormant sharesIn addition, Glen Communications Limited holds 100 per cent. of the ordinaryshares of Soluis IT Limited, a dormant company. 12. Stocks Group Company 2005 2004 2005 £ £ £Goods for resale 10,113 8,236 - -------- ------- ------13. Debtors Group Company 2005 2004 2005 £ £ £Trade debtors 51,615 50,940 -Other debtors 2,090 - -Prepayments and accrued income 154,921 11,918 11,590 -------- ------- ------ 208,626 62,858 11,590 -------- ------- ------14. Creditors: amounts falling due within one Group Companyyear 2005 2004 2005 £ £ £Bank loans and overdrafts (Note 16) 68,169 65,743 -Trade creditors 126,583 25,811 23,528Amounts owed to group undertakings - - 80,307Other taxation and social security 42,217 13,513 20,937Other creditors 3,000 9,553 -Directors' loans (Note 16) 28,000 - -Accruals and deferred income 78,840 29,168 5,320 -------- ------- ------ 346,809 143,788 130,092 -------- ------- ------ Included within accruals are amounts totalling £12,000 (2004: £6,000) due toDuncan Ventures Limited. Further details are included in note 16. 15. Creditors: amounts falling due after more than one year Group Company 2005 2004 2005 £ £ £Bank loans and overdrafts (Note 16) 58,516 75,000 -Directors' loans (Note 16) - 26,730 --------------------------------- ------- ------- ------ 58,516 101,730-------------------------------- ------- ------- ------ 16. Borrowing Group Company 2005 2004 2005 £ £ £Due within one year: 48,169 45,743 -- bank overdraft- bank loan 20,000 20,000 -- directors' loans 28,000 - -- loan due to a related party 12,000 6,000 -Due between two and five years: - - -- bank overdraft- bank loan 58,516 75,000 -- directors' loans - 26,730 -- loan due to a related party - - - -------- ------- ------ 166,685 173,473 - -------- ------- ------ The bank overdraft and bank loan are secured by a Floating Charge held by theBank of Scotland over all of the assets and undertakings of Glen CommunicationsLimited. The overdraft and loan are also secured by personal guarantees given bythe directors of Glen Communications Limited. The bank overdraft and bank loanbear interest at 2.75 per cent. above the base rate of HBoS plc. The directors' loans are unsecured and were interest free for the period ended30 November 2004. From that date the loans have borne interest at 2.75 per cent.above the base rate of HBoS plc and are due for repayment on the 1 December2005. At the year end the directors loans were represented by amounts due to PFord totalling £20,000 (2004: £23,538) and G Duncan totalling £8,000 (2004:£3,192). The loan due to a related party is due to Duncan Ventures Limited, a companycontrolled by Graham J Duncan. This loan is unsecured and was interest free forthe period ended 30 November 2004. From that date the loan has borne interest at2.75 per cent. above the base rate of HBoS plc and is due for repayment on the 1December 2005. 17. Leasing commitmentsAt 30 September 2005 the group had annual commitments under non-cancellableoperating leases as set out below: 2005 2004 Land & Other Land& Other Buildings Items Buildings ItemsOperating leases which expire: 8,666 49,607 12,300 258Within 1 yearWithin 2 to 5 years - 109,022 - 8,804 -------- -------- --------- ----- 8,666 158,629 12,300 9,062 -------- -------- --------- ----- Certain obligations of the subsidiary company have been guaranteed by theholding company. At the year end sums guaranteed amounted to £24,306 (2004:£Nil). 18. Share capitalAuthorised share capital: 2005 2004 No £ No £Ordinary shares of £0.01 each 80,000,000 800,000 80,000,000 800,000 --------- ------- --------- ------Allotted, called up and fullypaid: 2005 2004 No £ No £Ordinary shares of £0.01 each 60,000,000 600,000 25,000,000 250,000 --------- ------- --------- ------ Although the company was incorporated on 14 October 2004, comparative balances(that relate only to the group) have been presented on a pro forma basis. Thisis to comply with the provisions of merger accounting, as noted in theaccounting policies, whereby the group is treated as if it had always been inexistence. Upon incorporation, two subscriber shares of £0.01 each were issued at par. On 15 November 2004, 24,999,998 ordinary shares of £0.01 each were issued at£0.03 per share in consideration for the transfer to the company of the entireissued share capital of Glen Communications Limited. On 24 November 2004 options over 666,667 ordinary shares of £0.01 each weregranted to E M Hagman at £0.03 per share. On 25 November 2004 the Company entered into a placing agreement with SeymourPierce Limited and Seymour Pierce Ellis Limited pursuant to which Seymour PierceEllis agreed to place 25,000,000 ordinary shares of £0.01 each at a price of£0.03 pence per share on behalf of the Company. The placing was conditional,inter alia, upon admission of the Company's share capital to the AIM market ofthe London Stock Exchange which took effect on 1 December 2004. This issueraised £750,000 (before expenses). On 20 June 2005 the Company issued a further 10,000,000 ordinary shares of £0.01each at £0.03 per share to raise a further £300,000 (before expenses). Post balance sheet eventOn 27 October 2005, the company issued a further 10,000,000 new ordinary sharesof 1p each at 2.50 pence per share. The new ordinary shares will rank pari passuwith the existing ordinary shares. 19. Share premium account Group Company 2005 2004 2005 £ £ £Balance brought forward 500,000 500,000 -Premium on shares issued in the year 700,000 - 1,200,000Share issue expenses (242,459) - (242,459) -------- ------- -------Balance carried forward 957,541 500,000 957,541 -------- ------- ------- During the year the Company issued 35,000,000 ordinary shares of £0.01 each at apremium of £0.02 each. 20. Other reserves Group Company 2005 2004 2005Balance brought forward (101,914) (201,093) -Issue of shares in subsidiary - 99,179 -Balance carried forward (101,914) (101,914) -This relates to the acquisition of Glen Communications Limited which qualifiesfor merger accounting. 21. Profit and loss account Group Company 2005 2004 2005 £ £ £Balance brought forward (791,978) (586,929) -Accumulated profit/(loss) for the year (571,679) (205,049) 84,038 --------- --------- -----Balance carried forward (1,363,657) (791,978) 84,038 --------- --------- ----- The parent company has taken advantage of section 230 of the Companies Act 1985and has not included its own profit and loss account in these financialstatements. 22. Reconciliation of movements in shareholders' funds Group Company 2005 2004 2005 £ £ £Profit/(loss) for the financial year (571,679) (205,049) 84,038New share capital subscribed 350,000 - 600,000Net premium on new shares 457,541 - 957,541Issue of shares in subsidiary - 99,179 - ----------- ----------- -----------Movement on shareholders' equity 235,862 (105,870) 1,641,579Opening shareholders'equity/(deficit) (143,892) (38,022) - -------- ------- -------Closing shareholders'equity/(deficit) 91,970 (143,892) 1,641,579 -------- ------- -------23. Financial instrumentsThe group finances its operations through equity and bank borrowings. During thetwo years ended 30 September 2005, Glen Communications Limited was also financedby loans from its directors and by Duncan Ventures Limited, a company controlledby Graham J Duncan. No speculative treasury transactions are undertaken andduring the last two years no derivative contracts were entered into. Financialassets and liabilities include those assets and liabilities of a financialnature, namely cash, investments and borrowings. Short term debtors andcreditors have been excluded from the following disclosures. The fair value of the Group's financial assets and liabilities is not materiallydifferent to book value. 23. Financial instruments (Continued) 2005 2004 £ £ -------- ------Financial assets 211,160 26The group's financial assets and their maturity profile are: Cash at bank and in hand -------- ------Maturing 211,160 26One year or less on demand -------- ------Financial liabilities 48,169 45,743The group's financial liabilities and their maturity profileare:Bank overdraftBank loan 78,516 95,000Directors' loans 28,000 26,730Loan due to a related party 12,000 6,000 -------- ------ 166,685 173,473 -------- ------An analysis of the maturity of group debt is given in note 16. Liquidity riskThe group seeks to manage financial risk by ensuring sufficient liquidity isavailable to meet foreseeable needs and to invest cash assets safely andprofitably. The group policy throughout the year has been to ensure continuity of funding bya combination of equity funding and available bank facilities. Interest rate riskThe interest rate on the group's cash at bank is determined by reference to thebank rate. The interest rates on all the group's financial liabilities are at2.75 per cent. above the base rate of HBoS plc. The group has a committed overdraft facility of £50,000 (2004: £50,000) whichfalls due for renewal in December 2006. The group has a £100,000 five year termloan facility repayable in 60 monthly instalments of capital and interest, withthe final payment falling due in 2009. 24. AcquisitionOn 15 November 2004, the entire issued share capital of Glen CommunicationsLimited was acquired via a share exchange. The combination has been accountedfor using the merger method of accounting. Further details of the transactionare included in Accounting Policies, Basis of Preparation. 25. Controlling related partyAt 30 September 2005 there was no ultimate controlling party and the Company wasnot a subsidiary of a parent undertaking. 26. Deferred taxDeferred tax liability/(asset) provided for in the financial statements is setout below. Group Company Unrecognised Unrecognised 2005 2004 2005 £ £ £Accelerated capital allowances 130 (1,833) -Tax losses carried forward (199,472) (89,663) - --------- --------- ----- (199,342) (91,496) - --------- --------- ----- Deferred tax assets have not been recognised in respect of these losses due tothe current trading position of the group. 27. Glen Group plc consolidated profit and loss account from date ofincorporation on 14 October 2004 to 30 September 2005 £ Group turnover 437,803Cost of sales (243,470)-----------Gross profit 194,333Other operating income and charges (736,121)-----------Operating loss (541,788)Interest receivable 6,716Interest payable and similar charges (14,160)-----------Loss on ordinary activities before taxation (549,232)Tax on loss on ordinary activities ------------Loss for the period (549,232)======= The profit and loss account above is required by the Companies Act 1985 andcovers the first statutory accounting reference period of Glen Group plc fromits date of incorporation on 14 October 2004 to 30 September 2005. Disclosure notes for this period are not presented as the Directors do notbelieve they would provide meaningful information to users of the accounts. 28. Capital commitments There were no capital commitments at 30 September 2005 or 30 September 2004. 29. Contingent liabilitiesThere were no contingent liabilities at 30 September 2005 or 30 September 2004.30. Post balance sheet eventsOn 27 October 2005, the company issued a further 10,000,000 new ordinary sharesof 1p each at 2.50 pence per share. The new ordinary shares will rank pari passuwith the existing ordinary shares. As at 20 December 2005, the Company is in advanced negotiations to acquire,subject to shareholder approval, funding, and the re-admission to AIM of theproposed enlarged share capital of the Company, the entire issued share capitalof a company, which is an IT value added reseller. The name of the target andthe outline terms have not been released due to obligations of confidentiality. In conjunction with the proposed acquisition, the Directors have announced thatthey intend to conduct a placing of ordinary shares by the Company to raiseapproximately £2,500,000 which will be used principally to satisfy the proposedcash element of the acquisition and to pay the costs of the acquisition, theplacing, and the re-admission to AIM of the enlarged share capital of theCompany. This information is provided by RNS The company news service from the London Stock Exchange