Christie Regulatory News (CTG)

28 Mar 2008 07:01

Christie Group PLC28 March 2008 Christie Group plc Preliminary Results for the year ended 31 December 2007 Christie Group plc, is a leading provider of professional services for theleisure, retail and care sectors. Another record year - Operating profit increased by 15% to £7.0m (2006: £6.1m) - Profit before tax rose by 17% to £7.2m (2006: £6.2m) on revenue of £87.4m (2006: £87.1m) - Earnings per share increased by 13% to 19.12p (2006: 16.90p) - Final dividend is 2.75p per share, making a total dividend of 4.25p (2006: 4.00p) - Christie + Co expanded with new offices in London and Hamburg - Orridge established a further European stocktaking base in the Netherlands - Venners developed new areas of business in Compliance Audit and Food Safety Commenting on the results, Philip Gwyn, Chairman of Christie Group, said: "We continued to make good progress in 2007 and whilst being prepared for a moredemanding trading environment in 2008, we have seen encouraging new businessopportunities continuing to materialise in both the UK and Europe. Historically,we have experienced the opportunities to build our market share in a moredifficult trading environment. We have entered the New Year with substantialcash resources. We believe we are well placed to take advantage of opportunitiesas they occur." Enquiries Christie Group plc 020 7227 0707David Rugg, Chief ExecutiveRobert Zenker, Finance Director Weber Shandwick Financial 020 7067 0700Richard Hews, Rachel Martin, Hannah Marwood Charles Stanley Securities 020 7149 6000Nominated Adviser & BrokerRussell Cook / Carl Holmes Notes to Editors Professional Business Services The expertise offered by Christie + Co and Christie Finance covers all aspectsof valuing, buying, selling, financing and insuring a wide variety ofbusinesses. Its scope is complemented by the comprehensive appraisal and projectmanagement services available from Pinders. Software Solutions VCSTIMELESS specialises in sophisticated IT systems and solutions designed tocapture and control the complex sales and other data connected with themanagement of cinemas, hotels, restaurants, leisure complexes, warehouses andretail outlets internationally. Stock & Inventory Orridge and Venners are the leading specialists in stock control and inventorymanagement services. Employing state-of-the-art technologies and bespokesoftware, the division is focused on Europe, where both companies have a majorshare of the retail and leisure sectors. Further information on Christie Group plc is available at www.christiegroup.com. Chairman's Statement I am pleased to report a further record year with operating profit increased by15% to £7.0m (2006: £6.1m). Profit before tax rose by 17% to £7.2m (2006: £6.2m)on revenue of £87.4m (2006: £87.1m). Earnings per share rose by 13% to 19.12p(2006: 16.90p). I confirm that the final dividend is 2.75p per share, making atotal of 4.25p for 2007, an increase of 0.25p over the prior year. Christie Group delivered significant organic profit growth during the year. Thiswas achieved by focusing on further international expansion, leveraging ourcomplementary business services and skills to best advantage and developing newopportunities within the leisure, retail and care sectors. Our Professional Business Services Division returned a further strong tradingperformance, with a continued increase in revenues through our internationalnetwork of 11 (2007: 9) offices. Already in 2008 we have opened an additionalFrench regional office in Rennes. In April, we open in Finland with an office inHelsinki, serving the markets in Scandinavia, Russia and the Baltic states. Christie + Co has experienced a busy start to the year as longstanding businessowners seek to sell before the forthcoming changes in Capital Gains Tax on 5April. Also in April, we will see the start of the phasing in of EnergyPerformance Certificates for commercial properties. We consider that both thecost of inspections and lack of inspectors may disrupt the flow of businesses tothe market, and reduce opportunistic off-market acquisition activity. Portfoliodisposals now tend to be transacted as a series of individual or smaller tranchedisposals, as the effects of the credit crunch limit the scale of financeavailable to purchasers. In challenging times, however, property based tradingbusinesses remain an attractive asset class. Christie Finance should benefit from the Budget changes in the Small Firms LoanGuarantee Scheme, which will allow the Scheme to be used for financing existingbusinesses, as well as start-ups. Our Software Solutions Division saw a decline in revenue but an increase ingross margin as we reduced our dependency on the effects of third partysoftware. We gained 22 new customers through an impressive range of softwaresolutions already in place. We continued to invest in product development duringthe year but, due to a delay in product launch, losses from the divisionincreased. In October, we appointed a new Development Director and reorganisedour development facility. We also outsourced the bespoke customer developmentsfor our existing systems, for which an encouraging backlog of requirementsexists. As a result, we now expect to release our Colombus.next budgeting andassortment planning modules in June. Our Stock and Inventory Services Division contributed a solid performance, evenafter taking account of the costs of expansion in Europe. Through Orridge, wehave established a further European stocktaking base in the Netherlands. Vennersis the only stocktaking business to gain British Institute of Innkeepingaccreditation, and is successfully developing new areas of business includingspecialist food safety consultancy and operational audits. Together, thesecompanies offer a largely contra-cyclical, recurring revenue stream. We continued to make good progress in 2007 and whilst being prepared for a moredemanding trading environment in 2008, we have seen encouraging new businessopportunities continuing to materialise in both the UK and Europe. Historically,we have experienced the opportunities to build our market share in a moredifficult trading environment. We have entered the New Year with substantialcash resources. We believe we are well placed to take advantage of opportunitiesas they occur. Philip Gwyn27th March 2008 Chief Executive's Statement RIGOROUS APPLICATION OF A SIMPLE PHILOSOPHY As an international professional services organisation, Christie Group isfounded on knowledge. We continue to prosper through rigorous application of asimple business philosophy. We invest in, and continue to expand, those parts ofthe business that are successful. It is a tried and tested strategy and it serves us well. We have built upunrivalled expertise in our chosen markets - the leisure, care and retailsectors. We continue to grow profits organically. This was achieved on a stable turnoverof £87.4m compared with £87.1m in 2006. Our £7.0m profit for 2007 represents 15%progress on 2006's excellent performance. Professional Business ServicesRevenue: £51.4m (2006: £49.7m)Operating profit: £9.9m (2006: £8.4m) Software SolutionsRevenue: £12.6m (2006: £15.1m)Operating loss: £3.1m (2006: £2.4m) Stock and Inventory ServicesRevenue: £23.3m (2006: £22.3m)Operating profit: £0.5m (2006: £0.6m) We have adopted a measured approach over the past few years, focusing onbuilding a logical portfolio of complementary business activities throughsteady, organic growth. One of our greatest strengths is that we understand ourcustomers, their business operations and their markets in depth. We are market leaders in our chosen sectors. Christie + Co is Europe's numberone specialist business agency and valuation business; Pinders is the UK'slargest business appraiser; Venners is the largest stocktaker in the UKhospitality sector; Orridge provides the largest retail stocktaking service inthe UK and VCSTIMELESS is the leading retail software provider in the Europeanfashion industry. We seek to build on these strengths - by becoming more deeplyembedded in our specialist sectors and by understanding our customers moreclosely. We believe the underlying strength of our business stands us in good stead whenmarkets are changing. Shifting market dynamics may also create opportunities. As a debt-free (net)enterprise we are not currently constrained by increased cost of capital.Historically, the business has achieved some of its biggest gains in marketshare during challenging trading conditions. One of our major strengths is that we enjoy profit contributions from most ofour businesses. So, although VCSTIMELESS experienced a decline in revenues in2007 as it focused on bringing its .NEXT products to market, this was offset bystrong results elsewhere. We aim to build on the strengths of the separate businesses while leveraging ourability to act as a cohesive international group. Our growth in Europe is proceeding and we are broadening our geographic reach ineach of our three divisions. Christie + Co opened a Hamburg office - its fifthin Germany, we have established a stocktaking base in the Netherlands and oursoftware solutions now operate from London to Milan and New York to Tokyo. The rapid growth of the Christie + Co consultancy business is particularlypleasing. In just a few years we have capitalised on our industry knowledge tobecome one of the biggest hotel and care consultancies in Europe. Our financial businesses are addressing their niche markets in a far morefocused manner. We now have three distinct financial services businesses -Christie Finance, Christie Insurance and Christie Corporate Finance. At the year-end we welcomed two new MDs to lead these businesses. Sue Dougalbecame MD of Christie Finance and Christie Insurance, and building closersynergies with Christie + Co will be a strategic priority for these twobusinesses. Christie Corporate Finance was set up in 2007 to serve customerswith more substantial and complex requirements. Mark Stevens, who joined us in2007, became its MD at the end of the year. We are also extending our capabilities through an active programme of systemsdevelopment. For example, we are investing in a replacement for the Christie +Co internal computer system and evolving the Venners stocktaking system. In 2008 we will maintain our focus on sustainability through a combination ofgeographic expansion, increased market penetration in our core sectors,development of our services and increased synergies between our constituentbusinesses. I am confident that we are taking the right steps to enable the future growth ofour business. We provide demand services to the growing leisure, care and retailsectors, the medium and long-term prospects for which are good. Christie Group people have been crucial in our success so far. Attracting andretaining high quality personnel will remain a key priority. I wish to thank allour people for their great collective effort in 2007. Their skill, dedicationand drive applied to the markets we serve give me confidence for the future ofour business. Divisional Review 1 Professional business services Christie + Co Christie + Co is the largest business broker in Europe. We provide professionalbrokerage and advisory services throughout the UK and across Europe. We offerspecialist expertise and business intelligence in our chosen markets - hotels,pubs, restaurants, leisure, care and retail. With over 350 specialists, weoperate in 28 offices in the UK, France, Germany and Spain. By the end of 2007 European property values appeared to have peaked. Investorshad become more cautious and discerning and individual deals were taking longerto finalise but there was still support for the right commercial transactions. Our agency business did well throughout 2007. The hotel sector enjoyed strongtrading fundamentals, with most major European markets still in a growth phase.High quality hotel assets remained much sought-after and we continued toexperience good volume. We acted for Four Pillars Hotel Group during itsacquisition by RREEF Real Estate for a reported £120 million and also brokeredthe £32.5 million sale of the iconic St David's Hotel and Spa in Cardiff Bay,for Rocco Forte Hotels. Other highlights included: • Acquisition of eight Thistle hotels for Menzies Hotels for £54million. • Acting for the investors in the acquisition of the 19-hotel Bonsaiportfolio in France. • Acting for an investor in the acquisition of ten Jardins de Parishotels across the capital. In the public house sector the continuing shortage of freehold stock hasincreased activity in the leasehold market. This is creating new businessopportunities for Christie + Co. During 2007, for instance, we completed theletting of 637 former Spirit pubs from Punch Taverns' managed estate and securedpremiums for the majority of these leases. Following this success we handledletting campaigns for other leading pub companies, including Greene King,Marston's Pub Company, Charles Wells, Hall & Woodhouse and Mitchells & Butlers. The restaurant sector saw steady activity throughout the year and we took onseveral major appointments from, amongst others, Tragus, for its £14.15 millionacquisition of the 16-strong Ma Potter's chain and The Shire Group in itsacquisition of Smollensky's. The retail sector performed strongly during 2007 and we were involved in severalmajor deals including advising on disposals for Anglian Convenience Stores,Rusts and Martin McColl. We saw considerable activity in the forecourt sector,with acquisitive operators - including convenience, fast food and off-licencebrands - targeting sites across the UK. Our Valuation Services teams experienced increased volume in more challengingmarket conditions. With the credit crunch starting to bite, banks come toChristie + Co for independent valuations in order to help them identify whichdeals to back. Our sector specialists are also helping to value bid targets. We completed amajor advisory assignment for Terra Firma, which was assessing whether to bidfor Boots. This involved our retail valuation specialists visiting close to1,500 of Boots' UK and Irish stores in just four days. Our consultancy business made excellent progress during the year. Examples ofthe wide range of major assignments across Europe included feasibility studiesfor hotel chains in Germany and Austria. The rapidly developing care sector has been another major success for us in2007. In the UK, continuing consolidation plays to our strengths. In Germany,several investor groups appointed us to help them build portfolios. We continued our European expansion by opening a new office in Hamburg, oureleventh international office and our fifth German location; thereby extendingour Continental presence and enhancing our status in international markets. In 2008 we will focus on developing our core retail activities together with ourEuropean operations. We will also look to enhance the breadth and the quality ofour activities in our corporate markets. Christie Finance and Christie Insurance The rebranding of our finance businesses into three separate entities (ChristieFinance, Christie Insurance and Christie Corporate Finance) greatly assisted inthe market perception of what we offer and contributed to a strong trading year.On a like-for-like basis, Christie Finance and Christie Insurance increased feeincome by 5.5% compared to 2006. Christie Finance is building a growing national reputation for knowledge andexpertise when acting as a specialist commercial mortgage broker. We haveintegrated our mortgage brokers into Christie + Co's UK regional network andthere are now 25 brokers located in offices around the country. They operateentirely independently but can draw on Christie + Co's specialist marketknowledge to meet individual client needs. Christie Insurance has aligned itself with Christie + Co and specialises in thehospitality, retail, leisure and care sectors. It provides commercial andcorporate insurance and life assurance to allow business owners and corporateclients to protect their assets, income and debts. It has a particular strengthin the care sector and has adapted to the needs of individual clients as theyhave grown from operating one or two homes to over 100. The successful rebranding is already reaping significant rewards. We will buildon this while maximising the benefit we gain from our close association with oursister companies. Further developing our knowledge and expertise, increasing ourefficiency and growing the number of mortgage brokers will be key in 2008.Central for both companies will be a client-led approach, delivering impartialand expert services. Christie Corporate Finance Christie Corporate Finance was established to work with clients looking forcomplex, high value finance and refinancing packages. Our experienced corporatefinanciers offer a full service, specialising in acquisitions, disposals,management buy-outs, raising development capital for growth, deal structuringand asset-specific funding. We take a strategic approach to bringing lenders andequity providers on board. In particular, we act as lead adviser for the projectmanagement of a transaction and the co-ordination of the other professionaladvisers involved. In current market conditions, we offer borrowers a value-added service givingthem access to alternative sources of funding at a time when their previousbanks may not be in a position to absorb any further exposure. Now, more thanever, our up-to-date knowledge about which institutions will invest and on whatterms, is keenly sought by both purchasers and those wishing to re-finance. An example of where our sector expertise worked to the advantage of our clientsis when the owners of Balbirnie House Hotel sought finance for an ambitioushealth spa. Our chief aim in 2008 is to drive up our volume of transactions in order tobuild a substantial business. To this end, we are already recruiting and puttingour marketing plan into effect. Pinders Pinders combines business analysis and surveying skills to arrive at an accurateassessment of the trading potential and value of businesses. We specialise inthe healthcare, retail and licensed/leisure sectors, acting for potentiallenders, commercial brokers and buyers in M&A and refinancing situationswhenever an accurate business appraisal or valuation is required. Much of ourwork goes on behind the scenes and remains confidential. Our highly qualified surveyors and consultants have access to a UK databasecontaining detailed analysis in respect of over 180,000 businesses inspected byus. This resource is invaluable in assisting them to reach a measured judgementon the earnings potential and value of all kinds of businesses. The retail sector led an all-round improved performance from Pinders in 2007. Weissued 31% more reports than the previous year generating a 33% increase inretail-related income. Overall, turnover was up by 16% with notable performances in the care sector(where income increased by 36%) while leisure declined. There was also stronggrowth in our consultancy business, which was nearly twice as active as in theprevious year. In a significant move, we dispensed with our standard fee scale during the earlypart of the year in favour of a new bespoke fee structure. This more accuratelyreflects our clients' particular requirements as they become increasinglywide-ranging. Over the course of the year our average fee increased by 9%. We are receiving more appraisal instructions in the 'white coat' sector withvets, dentists, pharmacists and GPs now regularly enlisting our expertise. RydonGroup asked us to provide consultancy and valuation advice relating to theconstruction of a new doctors' surgery to form part of a landmark scheme inClapham, when they were seeking preferred bidder status with the localauthority. We continue to raise our profile in the charitable sector. When the ShaftesburySociety and the trustees of John Grooms were mooting a merger they asked us toproduce Charities Act-compliant reports and valuation advice. This required theinspection of specialist care homes, respite care centres and specially adaptedself-catering units. We work closely with new lenders in our specialist sectors and we were appointedto several new lender panels during the year. This was against the background ofa noticeable tightening in the number of available panel appointments as bankswork to ensure supplier quality. Looking ahead to 2008, we plan to increase the size of our appraisal business,recruit additional qualified staff, continue to develop our own graduatetraining programme and further refine our appraisal report. 2 Software solutions VCSTIMELESS, now the key brand for our software solutions division, wasoriginally set up to provide Electronic Point of Sale (EPoS) systems, whichlinked with order tracking and stock management systems. Originating in thehospitality sector, the company swiftly expanded into the leisure sector,particularly multiplex cinemas. Following a targeted acquisition in 2000 wemoved into the rapidly growing non-food retail sector. With numerous international customers, our solutions span the globe andencompass merchandise management, EPoS, CRM, supply chain optimisation andbusiness intelligence applications. We continued to invest in product development during 2007. We investedsubstantial funds to revamp our core applications and reposition them on moderntechnological platforms. Although revenue fell during the year to £12.6m (2006:£15.1m) we increased gross margins. This was achieved by controlling costs andconcentrating on selling our own software rather than re-selling third partysoftware. A much improved performance in Spain was a highlight of 2007. We signed sevennew customers including Coronel Tapiocca, with 150 stores in Spain, Italy andPortugal, and Salsa, an international fashion retailer with over 100 outletsacross Europe. We exhibited at Expo retail in Spain in September where wereceived a client testimony from Sans Branded Apparel, the Spanish lingerieretailer. Our UK operation - now restructured with strengthened sales and marketing -scored important wins. Luxury casualwear retailer Gant UK selected our flagshipEnterprise suite for its eight UK stores. We were also selected by both JohnRichard, a fashion jewellery chain with over 100 concessions in UK departmentstores and Historic Royal Palaces. The UK ended 2007 with a healthy pipeline andis well placed for 2008 and beyond. In the French market, Ripcurl Europe, the world's second largest surfing brandand Lewinger, a ladies' fashion retailer with 65 stores nationwide, implementedthe Colombus Enterprise suite to optimise merchandise management across theirstores. Both customers identified the multi-channel features of Colombus andVCSTIMELESS's .NET-based architecture strategy as key factors behind theirdecisions. Also, the French fashion retailer, Veti, implemented our Colombusmerchandise management solution at its central buying office. The French domestic market was challenging during 2007. All of our domesticrevenues came from existing customers. It was a different story elsewhere and wegained 22 new customers overall. 82% of the division's total business is nowgenerated outside the UK. Development delays in Colombus.next, our new generation supply chainoptimisation solution, meant that this product made no revenue contributionduring 2007 although the high level of interest for the product bodes well. Thefirst customer installation is planned for the first half of 2008. We completed our first BeStore implementation during 2007. This advanced EPoSsolution benefits from our worldwide partnership with Wincor Nixdorf andMicrosoft. We successfully rolled out BeStore into the tier-two Europeanretailer Comptoir des Cotonniers (part of the Japanese retail group FastRetailing). The solution was implemented simultaneously across more than 300stores in 10 European countries. The entire project was completed in just eightweeks. It confirms that our strategy of targeting large international retailerswith the latest applications based on .NET protocols and service-orientedarchitecture is the right one. Our first Columbus Ret@il Pocket roll-out to French fashion retailer Rodier wasalso a highlight in 2007. The solution trialled successfully in the 300-storefashion chain Caroll and was fully implemented by the end of January 2008. Sixretailers implemented our new Colombus Business Intelligence module in 2007. Going forward, management has identified three key success factors for thebusiness: Globalisation: we continue to invest in Asia and the US. With a Tokyo operationopening in 2008 we will be the only worldwide retail software vendor able tosell, implement and support a merchandise and store management solution in theUS, Europe and Asia; a genuine differentiator for our international customers. Innovation: our customers deserve and expect best-in-class, future-proofedsolutions. We continue to invest in product development and showcase the latesttechnologies in our FutureStore concept. Two years ago we presented a prototypeof our Ret@il Pocket mobile point of sale solution. This has now been rolled outby two major customers. We are currently showcasing RFID in-store applications.These will enter the mainstream in 2008. Industrialisation: we need to reduce time-to-market still further in order tocompete effectively. We invested heavily to industrialise our developmentprocess and raise productivity. The first fruits from this strategy will appearin 2008 when a number of new .NEXT modules will be launched at our June userconference. 3 Stock and inventory services Venners Venners is the longest established and the largest stock audit company servicingthe hospitality sector. Turnover was slightly down in 2007 (1.2%). However, this demonstrates ourunderlying strength following the loss of our biggest customer, London &Edinburgh Inns (which accounted for 11% of turnover) when it went intoadministration in 2006. No non-contracted client now accounts for more than 5%of our turnover. Experience counts in our business and we have plenty of it. Fourteen years isthe average length of service for our stocktakers and we are committed to highquality training. In 2007, we became the only stocktaking business to gainBritish Institute of Innkeeping accreditation for our basic stock auditortraining programme. Historically, stocktaking has formed the bulk of what we do. Over 90% of ouremployees, 170 people, are skilled stocktakers. They conducted over 25,000individual audits during the year. We also recognise that our customers' needs are changing and we are extendingour services to help meet new business challenges. In the pub sector manyoperators now face increased regulation having developed food offeringsfollowing the smoking ban. This has provided new challenges, not least with foodsafety where there can be no room for compromise. The risks to reputation andfrom litigation are just too severe. To meet this growing requirement, weintegrated a specialist food safety consultancy into our portfolio during 2007.Early signs of demand for this service are encouraging. Our operational compliance audit division, which assesses parts of a businessagainst agreed procedures, is also growing fast. New clients include theinternational event caterer Elior, for which we conduct audits at locationsranging from a Tesco's cafe to Ibrox Stadium. At the same time, we are extendingour relationships with existing clients. For example, Marston's, a long-standingstocktaking customer, appointed us to conduct compliance audits in its estate ofpubs. Much of our success is due to our highly skilled and experienced staff but wealso embrace technology. Our VenPowa product gives customers the ability toassess their own stock levels and is cementing our relationships with those whoneed interim as well as regular audits. Also, our inventory team uses digitalimagery and voice recording to produce a DVD product. This allows us to overcomelanguage barriers and service the European markets where we undertook projectsin eight countries during 2007. We believe we are the best at what we do and, following a strategic review, werebranded the business to emphasise 'excellence in audit'. In 2008, we willcontinue to focus on customer needs and work hard to communicate the quality andvalue of our service through a cohesive marketing programme. Orridge European retailers are increasingly outsourcing stocktaking. It makes sense. Tomanage its supply chain effectively, improve customer service and gain bottomline benefits, a company first needs an accurate picture of its stock levels. As a leading stocktaking service provider, that's good news for Orridge. We havealigned our services to the needs of modern international retailers. Wecurrently undertake assignments in 14 countries. We track stock across the supply chain from on-shelf availability inspections tocontinuous inventory monitoring. We bring these services together in our supplychain optimisation programme. For example, clothing and accessories specialistFat Face is one of a number of retailers now using the service to coordinate itsinternational sales and distribution. We bring experience, independence and authority to every project we take on.Over 1,000 people across the business support a growing list of clients. We workwith numerous blue chip retailers - internationally renowned names like Mexx, WEand Kruidvat. Retailers are highly price conscious and the UK retail market in particular isextremely competitive. Given that context, we performed well in 2007. Turnoverwas up both in the UK and on the Continent. During the year, we maintained ourfocus on strengthening our relationships with existing customers. We are well established in the UK where we work with some of the largest UKsupermarket chains, including Morrisons, Somerfield and the Co-op. Thesupermarket sector remains a strategic priority. We continued to diversify our client base to reduce reliance on individualcontracts. We won major new clients in 2007, such as Kookai, Savers, Gucci,Calvin Klein and TM Lewin. We increased our use of long-term contracts in line with our strategicobjectives. These are attractive for clients. They represent good value, aresimpler to manage and allow us to work together as partners with our clients toimprove stock handling and reduce stock holdings. They also help us to developour business as cashflow becomes far more predictable, thus providing thecompany with a sound financial base. In 2007 the vast majority of our work wascontract backed and we expect that proportion to increase further in 2008. Orridge has always embraced technology. We continue to invest in the latesthandheld technology as the retail market develops. Counters are equipped withwireless LAN scanners and laptops with broadband connectivity communicate theirresults in real time. Our technology-led approach helped us win a major contract for stocktakingservices in Belgium and the Netherlands for Kruidvat, Holland's leading pharmacyretailer. This contract extended our relationship with the AS Watson Group,building on existing relationships with its Superdrug and Savers subsidiaries. Our growing presence in the pharmacy sector is returning the company to itsroots. Orridge has had a specialist pharmacy team ever since Benjamin Orridgeopened for business as a chemists' valuer and transfer agent in 1846. We havesome of the most highly trained specialist stocktakers in the industry, and wewill continue to apply our specialist skills to increasing numbers ofpharmacies, doctors' surgeries, hospitals and medical service providers. Ourspecialist staff add value in this mission-critical sector. A good level of our revenue currently derives from mainland Europe. We aretargeting further European expansion with a European team to drive the process.We restructured our Belgian operation in 2007, opened a base in the Netherlandsduring the year and have further expansion planned. Consolidated Income Statement - AuditedFor the year ended 31 December 2007 Note 2007 2006 £'000 £'000 Revenue 3 87,372 87,096Employee benefit expenses (52,592) (50,949) 34,780 36,147Depreciation, amortisation and impairment* 3 & 8 (2,573) (1,298)Other operating expenses (25,206) (28,770)Operating profit 3 7,001 6,079Finance costs 4 (149) (274)Finance income 4 363 347Total finance credit 4 214 73Profit before tax 7,215 6,152Taxation 5 (2,567) (2,019)Profit for the year after tax 4,648 4,133 Attributable to:Equity Shareholders of the parent 4,648 4,131Minority interest - 2 4,648 4,133 Earnings per share -Basic 7 19.12p 16.90p -Fully diluted 7 18.65p 16.41p All the amounts derive from continuing activities. \* This includes a £1,329,000 impairment recognised against the softwaredevelopment asset. Consolidated Statement of Changes in Shareholders' Equity - AuditedAs at 31 December 2007 Attributable to the Equity Holders of the Company Minority Total Interest equity Share Fair value Cumulative Retained capital and other translation earnings reserves reserve £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 January 2006 500 4,722 (229) 4,802 19 9,814Currency translation adjustments - - (153) - - (153)Net expenses recognised directly in - - (153) - - (153)equityProfit for the year - - - 4,131 2 4,133Total recognised income/(expenses) - - (153) 4,131 2 3,980for the yearIssue of share capital 4 105 - - - 109Movement in respect of employee share - (523) - - - (523)schemeEmployee share option scheme: - value of services - 106 - - - 106providedPurchase of minority interest - - - (15) (21) (36)Dividends paid - - - (917) - (917)Balance at 1 January 2007 504 4,410 (382) 8,001 - 12,533Exchange difference on repayment of - - (27) 27 - -foreign exchange loanCurrency translation adjustments - - 546 - - 546Net income recognised directly in - - 519 27 - 546equityProfit for the year - - - 4,648 - 4,648Total recognised income for the year - - 519 4,675 - 5,194Issue of share capital 1 33 - - - 34Movement in respect of employee share - (858) - (30) - (888)schemeEmployee share option scheme: - value of services - 121 - - - 121providedDividends paid - - - (1,030) - (1,030)Balance at 31 December 2007 505 3,706 137 11,616 - 15,964 Consolidated Balance Sheet - AuditedAs at 31 December 2007 Note 2007 2006 £'000 £'000AssetsNon-current assetsIntangible assets - Goodwill 4,096 4,096Intangible assets - Other 8 4,555 3,166Property, plant and equipment 1,796 2,214Deferred tax assets 2,664 2,176Available-for-sale financial assets 300 300Other receivables 1,088 - 14,499 11,952Current assetsInventories 404 332Trade and other receivables 13,248 14,279Current tax assets - 282Cash and cash equivalents 10,593 11,414 24,245 26,307Total assets 38,744 38,259EquityCapital and reserves attributable to the Company's equity holdersShare capital 505 504Fair value and other reserves 3,706 4,410Cumulative translation reserve 137 (382)Retained earnings 11,616 8,001Total equity 15,964 12,533LiabilitiesNon-current liabilitiesBorrowings 1,275 1,735Retirement benefit obligations 4,343 6,300Provisions for other liabilities and charges 432 145 6,050 8,180Current liabilitiesTrade and other payables 15,545 16,800Borrowings 468 737Current tax liabilities 700 -Provisions for other liabilities and charges 17 9 16,730 17,546Total liabilities 22,780 25,726Total equity and liabilities 38,744 38,259 These Consolidated financial statements have been approved for issue by theBoard of Directors on 27 March 2008. Consolidated Cash Flow Statement - AuditedFor the year ended 31 December 2007 2007 2006 Note £'000 £'000Cash flow from operating activitiesCash generated from operations 9 7,952 10,631Interest paid (149) (274)Tax paid (2,036) (3,233)Net cash generated from operating activities 5,767 7,124Cash flow from investing activitiesPurchase of minority interest in subsidiary - (36)Purchase of property, plant and equipment (PPE) (786) (1,407)Proceeds from sale of PPE 41 156Intangible asset expenditure (2,485) (1,503)Proceeds from disposal of intangible assets - 1,193Investment in an available-for-sale asset (9) (53)Interest received 363 347Net cash used in investing activities (2,876) (1,303)Cash flow from financing activitiesProceeds from issue of share capital 34 109Payments to ESOP (1,976) (523)Repayment of borrowings (477) (82)Payments of finance lease liabilities (9) (59)Dividends paid (1,030) (917)Net cash used in financing activities (3,458) (1,472)Net (decrease)/increase in net cash (including bank overdrafts) (567) 4,349Cash and cash equivalents at beginning of year 11,160 6,811Cash and cash equivalents at end of year 10,593 11,160 Notes to the Consolidated Financial Statements - Audited 1. BASIS OF PREPARATION The consolidated and Company financial statements of Christie Group plc havebeen prepared in accordance with International Financial Reporting Standards(IFRS). These consolidated and Company financial statements have been preparedunder the historical cost convention. The financial statements have been prepared in accordance with IFRS and IFRICinterpretations issued and effective or issued and early adopted as at the timeof preparing these statements (March 2008). The preparation of financial statements in accordance with IFRS requires the useof certain critical accounting estimates. It also requires management toexercise judgement in the process of applying the Company's accounting policies.The areas involving a higher degree of judgement or complexity, or areas whereassumptions and estimates are significant to the consolidated and parent companystatements are disclosed in Note 2. Interpretations and amendments to published standards effective in 2007 The following amendments and interpretations to standards are mandatory for theGroup's accounting periods beginning on or after 1 January 2007. - IFRS 7, Financial instruments: Disclosures, and the complementaryAmendment to IAS 1, Presentation of Financial Statements - Capital Disclosures.IFRS 7 introduces new disclosures relating to financial instruments, which arereflected in the financial statements as appropriate. This standard does nothave any impact on the classification and valuation of the Group's financialinstruments. - IFRIC 8, Scope of IFRS 2. This interpretation requires considerationof transactions involving the issuance of equity instruments, where theidentifiable consideration received is less than the fair value of the equityinstruments issued to establish whether or not they fall within the scope ofIFRS 2. The Company already applies an accounting policy which complies withthe requirements of IFRIC 8. - IFRIC 10, Interim Financial Reporting and Impairment. IFRIC 10prohibits the impairment losses recognised in an interim period on goodwill,investments in equity instruments and investments in financial assets carried atcost to be reversed at a subsequent balance sheet date. This interpretationdoes not have any impact on the Group's financial statements. It is anticipated that mandatory new standards or interpretations, effective foraccounting periods beginning on or after 1 January 2007, not coveredspecifically above will have no impact on the Group's financial statements. Standards, interpretations and amendments to published standards that are notyet effective Certain new standards, amendments and interpretations to existing standards havebeen published that are mandatory for the Group's accounting periods beginningon or after 1 January 2008 or later periods but which the Group has not earlyadopted, are as follows: - IFRIC 11, Group and Treasury Share Transactions (effective foraccounting periods beginning on or after 1 March 2007). The interpretationprovides guidance on whether share-based transactions involving treasury sharesor involving group entities (for instance, options over a parent's shares)should be accounted for as equity-settled or cash-settled share-based paymenttransactions. The Group will apply IFRIC 11 from 1 January 2008, but it is notexpected to have any impact on the Group's financial statements. - IFRS 8, Operating Segments (effective for accounting periods on orafter 1 January 2009). IFRS 8 proposes that entities adopt 'the managementapproach' to reporting the financial performance of its operating segments.Management is currently assessing the impact of IFRS 8 on the format and extentof disclosures presented in the financial statements. - IFRIC 14, 'IAS 19 - The limit on a defined benefit asset, minimumfunding requirements and their interaction' (effective from 1 January 2008).IFRIC 14 provides guidance on assessing the limit in IAS 19 on the amount of thesurplus that can be recognised as an asset. It also explains how the pensionasset or liability may be affected by a statutory or contractual minimum fundingrequirement. The Group will apply IFRIC 14 from 1 January 2008, but it is notexpected to have any impact on the Group or Company's financial statements. It is anticipated that new standards or interpretations, currently in issue atthe time of preparing these financial statements (March 2008), not coveredspecifically above will have no impact on the Group's financial statements. 2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually evaluated and are based on historicalexperience and other factors, including expectations of future events that arebelieved to be reasonable under the circumstances. 2.1 Critical accounting estimates and assumptions The Group makes estimates and assumptions concerning the future. The resultingaccounting estimates will by definition, seldom equal the related actualresults. The estimates and assumptions that have a significant risk of causinga material adjustment to the carrying amounts of assets and liabilities withinthe next financial year are discussed below. (a) Estimated impairment of goodwill Goodwill is subject to an impairment review both annually and when there areindications that the carrying value may not be recoverable, in accordance withthe accounting policy. The recoverable amounts of cash-generating units havebeen determined based on value-in-use calculations. These calculations requirethe use of estimates. (b) Retirement benefit obligations The assumptions used to measure the expense and liabilities related to theGroup's two defined benefit pension plans are reviewed annually byprofessionally qualified, independent actuaries, trustees and management asappropriate. The measurement of the expense for a period requires judgementwith respect to the following matters, among others: - the probable long-term rate of increase in pensionable pay;- the discount rate;- the expected return on plan assets; and- the estimated life expectancy of participating members. The assumptions used by the Group, may differ materially from actual results,and these differences may result in a significant impact on the amount ofpension expense recorded in future periods. In accordance with IAS 19, theGroup amortises actuarial gains and losses outside the 10% corridor, over theaverage future service lives of employees. Under this method, major changes inassumptions, and variances between assumptions and actual results, may affectretained earnings over several future periods rather than one period, while moreminor variances and assumption changes may be offset by other changes and haveno direct effect on retained earnings. (c) Software development In accordance with IAS 38 'Intangible assets' software development expenditureis recognised as an asset to the extent that a market exists for the productsand that the products will generate future economic benefits. Future cash flows expected to be generated by the completed products areprojected taking into account market conditions over a 5 year period. Thepresent value of these cash flows determined using an appropriate discount rate,is compared to the current carrying value and, if lower the assets are impairedto the present value. These calculations require the use of estimates. 3. SEGMENT INFORMATION a. Primary reporting format - business segments The Group is organised into three main business segments: Professional BusinessServices, Software Solutions and Stock and Inventory Services. The segment results for the year ended 31 December 2007 are as follows: Stock and Professional Business Software Inventory Services Solutions Services Other Group £'000 £'000 £'000 £'000 £'000 Continuing OperationsTotal gross segment sales 51,512 12,640 23,320 2,913 90,385Inter-segment sales (100) - - (2,913) (3,013)Revenue 51,412 12,640 23,320 - 87,372Operating profit/(loss) 9,921 (3,107) 544 (357) 7,001Net finance credit 214Profit before tax 7,215Taxation (2,567)Profit for the year after tax 4,648 The segment results for the year ended 31 December 2006 are as follows: Stock and Professional Business Software Inventory Services Solutions Services Other Group £'000 £'000 £'000 £'000 £'000 Continuing OperationsTotal gross segment sales 49,739 15,053 22,337 2,777 89,906Inter-segment sales (33) - - (2,777) (2,810)Revenue 49,706 15,053 22,337 - 87,096Operating profit/(loss) 8,386 (2,400) 555 (462) 6,079Net finance credit 73Profit before tax 6,152Taxation (2,019)Profit for the year after tax 4,133 Other segment items included in the income statements for the years ended 31December 2007 and 2006 are as follows: Stock and Professional Software Inventory Business Solutions Services Other Group Services £'000 £'000 £'000 £'000 £'000 31 December 2007Depreciation, amortisation and impairment 402 2,038 100 33 2,573Impairment of trade receivables 469 (121) 14 - 36231 December 2006Depreciation and amortisation 557 333 379 29 1,298Impairment of trade receivables 701 382 55 - 1,138 The segment assets and liabilities at 31 December 2007 and capital expenditurefor the year then ended are as follows: Professional Software Stock and Business Services Solutions Inventory Services Other Group £'000 £'000 £'000 £'000 £'000 Assets 10,614 11,618 6,040 7,808 36,080Deferred tax assets 2,664 38,744Liabilities 9,669 4,401 3,526 2,749 20,345Current tax liabilities 700Borrowings (excluding finance leases) 1,735 22,780 Capital expenditure 277 2,676 343 2 3,298 The segment assets and liabilities at 31 December 2006 and capital expenditurefor the year are as follows; Professional Software Stock and Business Services Solutions Inventory Services Other Group £'000 £'000 £'000 £'000 £'000 Assets 10,433 11,953 5,329 8,086 35,801Deferred tax assets 2,176Current tax assets 282 38,259Liabilities 12,959 4,268 4,056 1,977 23,260Borrowings (excluding finance leases) 2,466 25,726 Capital expenditure 191 1,776 997 94 3,058 Segment assets consist primarily of property, plant and equipment, intangibleassets, inventories, receivables and operating cash. They exclude taxation. Segment liabilities comprise operating liabilities. They exclude items such astaxation and corporate borrowings. Capital expenditure comprises additions to property, plant and equipment andintangible assets. b. Secondary reporting format - geographical segments The Group manages its business segments on a global basis. The UK is the homecountry of the parent. The operations are based in two main geographical areas.The main operations in the principal territories are as follows: - Europe- Rest of the World (primarily North America) The Group's sales are mainly in Europe. Sales are allocated based on thecountry in which the customer is located. 2007 2006 £'000 £'000RevenueEurope 87,098 86,435Rest of the World 274 661 87,372 87,096 2007 2006 £'000 £'000Total segment assetsEurope 35,989 35,666Rest of the World 91 135 36,080 35,801 Capital expenditure is allocated based on where the assets are located. 2007 2006 £'000 £'000Capital expenditureEurope 3,297 3,058Rest of World 1 - 3,298 3,058 2007 2006 £'000 £'000Analysis of revenue by categorySales of goods 4,431 6,709Revenue from services 82,941 80,387 87,372 87,096 4. FINANCE (CREDIT)/COSTS 2007 2006 £'000 £'000Interest payable on bank loans and overdrafts 146 267Other interest payable 2 5Interest payable on finance leases 1 2Total finance costs 149 274Bank interest receivable (352) (335)Other interest receivable (11) (12)Total finance income (363) (347)Net finance credit (214) (73) 5. TAXATION 2007 2006 £'000 £'000Current taxUK Corporation tax at 30% (2006: 30%) 3,058 2,406Foreign tax 29 73Adjustment in respect of prior periods (15) (267)Total current tax 3,072 2,212Deferred taxOrigination and reversal of timing differences (528) (193)Impact of change in UK tax rate 145 -Adjustment in respect of prior periods (122) -Total deferred tax (505) (193)Tax on profit on ordinary activities 2,567 2,019 The current tax for the year is higher (2006: higher) than the standard rate ofcorporation tax in the UK (30%). The differences are explained below: Tax on profit on ordinary activities 2007 2006 £'000 £'000Profit on ordinary activities before tax 7,215 6,152Profit on ordinary activities at standard rate of UK corporation taxof 30% (2006: 30%) 2,165 1,846Effects of:- tax losses not yet utilised 672 716- expenses not deductible for tax purposes 228 478- taxable deductions (379) (638)- utilisation of tax losses and other deductions (18) (5)- adjustment to tax charge in respect of previous periods (15) (267)- fixed asset timing differences (14) 62- other timing differences 433 26- rate differential on certain tax losses - (6)Total current tax 3,072 2,212 6. DIVIDENDS 2007 2006Group and Company £'000 £'000Interim2006 interim, paid October 2006 (1.25p) - 3062007 interim, paid October 2007 (1.50p) 362 -Final2005 final, paid June 2006 (2.50p) - 6112006 final, paid June 2007 (2.75p) 668 - 1,030 917 A dividend in respect of the year ended 31 December 2007 of 2.75p per share,amounting to a total dividend of £672,000, is to be proposed at the AnnualGeneral Meeting on 23 June 2008. These financial statements do not reflect thisproposed dividend. 7. EARNINGS PER SHARE Basic earnings per share is calculated by dividing the profit attributable toequity holders of the Company by the weighted average number of ordinary sharesin issue during the year. 2007 2006 Profit attributable to equity holders of the Company (£'000) 4,648 4,131Weighted average number of ordinary shares in issue (thousands) 24,310 24,448Basic earnings per share (pence) 19.12 16.90 Diluted earnings per share is calculated by adjusting the weighted averagenumber of ordinary shares outstanding to assume conversion of all dilutivepotential ordinary shares. The Company has only one category of dilutivepotential ordinary shares: share options. The calculation is performed for the share options to determine the number ofshares that could have been acquired at fair value (determined as the averageannual market share price of the Company's shares) based on the monetary valueof the subscription rights attached to outstanding share options. The number ofshares calculated as above is compared with the number of shares that would havebeen issued assuming the exercise of the share options. 2007 2006Profit attributable to equity holders of the Company (£'000) 4,648 4,131Weighted average number of ordinary shares in issue (thousands) 24,310 24,448Adjustment for share options (thousands) 610 728Weighted average number of ordinary shares for diluted earnings per share (thousands) 24,920 25,176Diluted earnings per share (pence) 18.65 16.41 8. INTANGIBLE ASSETS - OTHERGroup Software Software Total £'000 development £'000 £'000CostAt 1 January 2007 267 3,038 3,305Exchange adjustments 19 268 287Additions 97 2,404 2,501Disposals (49) - (49)At 31 December 2007 334 5,710 6,044Accumulated amortisation and impairmentAt 1 January 2007 139 - 139Exchange adjustments 43 - 43Charge for the year 27 - 27Impairment loss recognised - 1,329 1,329Disposals (49) - (49)At 31 December 2007 160 1,329 1,489Net book amount at 31 December 2007 174 4,381 4,555 The expected useful lives are as follows: Software 3 - 10 yearsSoftware development 5 - 10 years The investment in software development relates to development of products forresale in the Software Solutions division. The £1,329,000 impairment loss recognised against the software development assetreflects a delay in the likely receipt of future economic benefits that thedevelopment can generate identified through a regular review of the softwaredevelopment. The recoverable amount of the software development asset was determined based onvalue-in-use calculations. These calculations use cash flow projections basedon current business plans over the next 5 years. The key assumptions for thevalue-in-use calculations are those regarding revenue growth rates and discountrates. Management determined budgeted revenue growth based on past performanceand its expectations for the market development. The discount rate of 15% wasdetermined using post-tax rates that reflect current market assessments of thetime value of money and the risks specific to the Software Solutions division. Group Software Software Total £'000 development £'000 £'000CostAt 1 January 2006 202 2,719 2,921Exchange adjustments (4) (34) (38)Additions 105 1,546 1,651Disposals (36) (1,193) (1,229)At 31 December 2006 267 3,038 3,305Accumulated amortisationAt 1 January 2006 111 - 111Exchange adjustments (4) - (4)Charge for the year 49 - 49Disposals (17) - (17)At 31 December 2006 139 - 139Net book amount at 31 December 2006 128 3,038 3,166 The Software development disposal reflects amounts relating to the Christie + Cooperational support system, the costs of which were recovered from the thirdparty software house contracted to provide the system. 9. NOTES TO THE CASH FLOW STATEMENT Cash generated from operations 2007 Group £'000 2006 £'000 Profit for the year after taxation 4,648 4,133Adjustments for: - Taxation 2,567 2,019 - Finance credit (214) (73) - Depreciation 1,217 1,249 - Amortisation and impairment of intangible assets 1,356 49 - Loss/(profit) on sale of property, plant and equipment 10 (47) - Loss on sale of intangible assets - 19 - Foreign currency translation 212 (105) - Increase in provision for other liabilities and charges 295 154 - Movement in available-for-sale financial asset 9 53 - Movement in share option charge 121 106 - Movement in retirement benefit obligation (1,957) (490)Changes in working capital (excluding the effects of exchange differences onconsolidation): - Increase in inventories (72) (22) - Decrease/(increase) in trade and other receivables 1,031 (318) - (Decrease)/increase in trade and other payables (1,271) 3,904Cash generated from operations 7,952 10,631 10. RECONCILIATION OF MOVEMENT IN NET FUNDS As at As at 1 January 31 December 2007 Cash flow Non-cash movements 2007 £'000 £'000 £'000 £'000 Cash in hand and at bank 11,414 (821) - 10,593Overdraft (45) 45 - -Invoice discounting (209) 209 - -Debt due after one year (1,735) - 460 (1,275)Debt due within one year (477) 477 (460) (460)Finance leases due within one year (6) 9 (11) (8) 8,942 (81) (11) 8,850 Financial information The financial information does not constitute the statutory financial statementsof the Company as defined by Section 240 of the Companies Act 1985. It is anextract from the financial statements for the year ended 31 December 2007, whichhave not yet been filed with the Registrar of Companies. The auditors' reportwas unqualified. The auditors' report does not contain a statement under eitherSection 237(2) or (3) of the Companies Act 1985. The Group's auditors havereported on the financial statements as required by Section 235 of the CompaniesAct 1985. Key dates The Annual Report and Financial Statements are scheduled to be posted toshareholders in early May. The Annual General Meeting of the Company isscheduled to take place at 10am on Friday 23 June 2008 at 39 Victoria Street,London, SW1H 0EU. Dividends, the ex-dividend date is 28 May 2008, the record date 30 May 2008 andthe date payable is 27 June 2008. This information is provided by RNS The company news service from the London Stock Exchange