Last checked at 30 Mar 2007 07:01
Christie Group PLC30 March 2007 Christie Group plc 30 March 2007 Audited Preliminary Results for the year ended 31 December 2006 Christie Group, a leading business services and software group, today announcesits preliminary results for the year ended 31 December 2006. Our year in brief • Revenue up by 12% to £87.1 million• Operating profit up by 38% to £6.1 million• EPS up 57% to 16.90p• Total dividend for 2006 up 0.5p to 4p• Christie + Co's European offices into profit• New Christie + Co offices opened in Marseilles and Dusseldorf• Orridge wins major food retailer• First BeStore customer for VCSTIMELESS• Strong performance in buoyant market for Professional Business Services Division "2006 was a year of continued development for Christie Group and these recordresults demonstrate the strength of the Group. Our sources of income arediverse but complimentary. We trade across three major sectors, whilstoperating on a wide yet manageable geographical scale. We have delivered onwhat we set out to do in Christie + Co Europe by reporting a maiden profit forthe year." Chairman's Statement Our agency and valuations business, Christie + Co, gave a robust performance. Itcontinues to benefit from its focus on substantial but specialist business areassuch as licensed, leisure, care and retail, to a depth of understanding thatcannot be matched by any of our competitors. A particularly pleasing aspect of the year is that the European offices ofChristie + Co came into profit for the first time, having achieved a 54% salesgain in the year. The first European office was opened nine years ago. Sincethat time, the growth of the European business has been supported by strongmarketing aimed at developing the Christie + Co brand. We have also opened otheroffices in major national or regional centres and finally we have recruited anddeveloped suitably skilled staff members. We now have eight offices in threecountries (France, Spain and Germany). We believe the way ahead should proveless arduous. In aggregate, the Professional Business Services division produced a profit of£8.4 million on a turnover of £49.7 million. Our software solutions business produced an increased loss of £2.4 million.Whilst sales increased to £15.1 million, our new software was only available forpilot testing towards the end of this period, but we believe this shouldgenerate increasing sales orders as the year progresses. Our stocktaking division continued to grow, but as reported in my interimstatement in what proved to be something of a transitional year, it incurredhigh training costs as part of re-equipping. We won our first major foodretailer, Co-op, and we foresee good growth prospects for us in this sector. In summary, professional business services and stock and inventory servicestogether generated over £8.9 million operating profit and £11.6 million of cash.Continued investment in software development is programmed for 2007 and 2008. Weintend to meet such costs from our existing cash resources, without impinging onour ability to fund growth in our profitable divisions The Board proposes a final dividend of 2.75p (2005: 2.50p) per share, totalling4.0p (2005: 3.50p) for the year, an increase of 14%. We have enjoyed a very good year, thanks to the commitment of our skilled teamsand we continue to see scope for further improvement. Philip GwynChairman Enquiries Christie Group 020 7227 0707 David Rugg, Chief Executive Robert Zenker, Finance Director Brunswick 020 7404 4959 Ash SpiegelbergCharles Stanley Securities 020 7149 6457 Philip Davies Notes to editors Christie Group plc (CTG.L) is listed on AIM. It is a leading business servicesand software group with three business divisions: Professional BusinessServices, Software Solutions and Stock & Inventory Services. The threecomplementary businesses focus on the leisure, retail and care markets. ChristieGroup has 34 offices across Europe - located in the UK as well as Belgium,France, Germany, Italy and Spain - and one office in Canada. For more information please go to: www.christiegroup.com Chief Executive's Statement Our business philosophy is to focus on what we know and do best. Years ofexperience serving leisure, retail and care clients have given us a profoundunderstanding of the operational dynamics that govern these sectors. As aresult, our clients - and ultimately Christie Group stakeholders - gain the fullbenefit of our skills and expertise. Adhering to our philosophy served us well in 2006. Our turnover rose by 12% from£77.5 million to £87.1 million. Equally encouraging, our total operating profitrose by 38% from £4.4 million to £6.1 million. Each of our three divisions -professional business services, software solutions and stock and inventoryservices - achieved material organic growth within our areas of businessactivity. Consistent with our strategy, each division also worked to develop a portfolioof logically related pan-European services meeting the requirements that runthroughout our clients' business activities. During the year, we reinforced thiscontinental platform with the opening of new offices in Marseilles andDusseldorf. Now, we are better placed than ever in France and Germany andparticularly well-positioned to grow our hotel consultancy and retailstocktaking and software business in an enlarged European Union. As a result,our business risks and opportunities are diversified across a number ofeconomies, industry sectors and types of service provision. Our investment policy has also proved to be successful. We continue to providethe requisite time, energy, expertise and people in all our businesses, and wehave invested in new products and appropriate strategic alliances. An example ofthis is our partnership with the Japanese third-party IT service provider PBC.Also during 2006, we built on the success of existing partnerships with otherleading third-party companies such as Capgemini, BearingPoint and LogicaCMG. What we are not doing, however, is engaging in technological innovation for itsown sake. That is not in our, or our customers' interests. Instead, in 2006 wecontinued to ensure that our investment in research and development programmeswas confined to creating new products and services that would give us acompetitive edge in best meeting customers' needs. Looking ahead, whileChristie Group remains a market leader in the services we provide, the potentialfor growth remains significant. In each of our three divisions, we pursue astrategy for growth by accessing a wider geographical market for our productsand services, and deliberately moving higher up the value chain - whilstmaintaining our penetration of private clients' requirements in ourmulti-domestic markets. Our client focus is often the requirement of the companyor division in addition to that of the individual trading unit. The arrival of financial buyers in our business environment increases ourability to provide services across the leisure, retail and care markets as suchinvestors are catholic in the range of businesses they own. In each of ourchosen sectors we see opportunities to serve a wider range of businesses withoutlosing our sector focus. Examples include forecourt businesses, domiciliary careand event catering. One of the challenges to sustainable growth is attracting and retaining theright people. In 2006 we made progress in this area, selectively expanding ourstaff while our profits for the same period rose by 38%. The productivity andprofessionalism of everyone in the group should be applauded. Thanks to the efforts of Christie Group people, we are well-equipped to face thefuture. Divisional review Professional Business Services Christie Group has its origins as a supplier of professional business services.This division, comprising three companies, still develops that role and remainsthe largest part of our group. Today's services include provision of business intelligence in our specialistsectors through Christie + Co; market leadership in finance and insurance fromChristie First; and business appraisal, valuation and consultancy by Pinders. Overall, turnover in the division in 2006 rose by 15% to £49.7m and profit by86% to £8.4m. Christie + Co The 2006 strategy for Christie + Co, the oldest and largest component in thedivision, was to continue focusing on its specialist areas. Overall, our aim wasto leverage the brand to its maximum potential and enhance positive perceptionsof Christie + Co throughout our target markets. This was achieved through, amongother things, the consolidation of the new brand and the launch of a bespokee-marketing tool; part of a wider marketing strategy to reduce our reliance onprinted material. At the same time, we continued to make the most of promising opportunities toincrease our business reach, both geographically and within our defined areas ofexpertise. This strategy worked. In 2006 there were improvements in performanceand earnings throughout the business, including a 17% growth in like-for-likefee income. Also, in the UK, for example, we saw a substantial increase inprofits over the previous year and the number of agency inspections rose by1,500. Such success was due to creativity and hard work, helped by market conditionsthat were decidedly in our favour. This situation is likely to continue thanksto the growing trend for existing and future clients to seek the sort ofspecialist advice and services for which we are well-known; for example,investment advice. From our operations in the UK and continental Europe, we are increasinglyinvolved in global markets. Continued expansion, including the opening of ourMarseilles and Dusseldorf offices, has helped to enhance our standing as abusiness adviser to clients beyond the confines of Europe. Private equity is growing in importance throughout our specialist markets, andmembership of the British Venture Capital Association provides us with valuablelinks to this industry. In a year of overall success, we negotiated the sale of the London andBirmingham Metropole hotels on behalf of Hilton Hotel Corporation, and wesuccessfully launched the on-going instruction from Punch to convert 720 managedpubs throughout the UK to leases for premiums. Other highlights included: • The valuation of Paragon Healthcare in advance of HgCapital'sacquisition of the business for £322 million • The sale of Oakley Court in Windsor off an asking price of £50million, on behalf of Queens Moat Houses • Valuation of more than 1,500 pubs for The Wolverhampton & DudleyBreweries • The sale of 11 Holiday Inn hotels on behalf of LRG Acquisition Looking ahead, we will focus on improving our core retail agency activities aswell as raising the game in delivering local valuation services. We will alsoconcentrate on enhanced activities in our corporate markets, and further developour European operations. Christie Finance and Christie Insurance We embarked on a major re-branding programme in 2006, which will result in theemergence of four new trading names in 2007: Christie Finance, ChristieCorporate Finance, Christie Insurance and Christie Corporate Insurance. Theintention is that the two new corporate brands will focus on furtherestablishing the Christie name as a leading provider of financial services inour corporate markets. Christie Finance continued to expand during the year, partly as a result of are-structuring. Re-aligning the business more closely with Christie + Co tookfurther advantage of the two companies' synergies whilst retaining ChristieFinance's independence in the finance market. In line with the resulting heightened activity, there was a significant increasein the number of business mortgage personnel appointments throughout ourregions. Pinders The star performer in our appraisal, valuation and consultancy business was theretail sector. Instructions on an increasingly varied range of businesses wereup by more than 30% over the previous year, exceeding 2006 forecasts. Thisincreased activity occurred not only in our more traditional markets but also inniche markets that benefited from our diversity of expertise and involvement.The level of weekly instructions fluctuated in our other sectors, due to acombination of increased competition and fewer quality businesses coming to themarket. However, lenders remained committed to these business sectors and, withcontinued demand from purchasers, values continued to rise. Overall, lenders continued to be reticent about funding leasehold goingconcerns, preferring to concentrate more on freehold businesses. This had aparticular impact on the number of leisure sector appraisals we undertook in2006. The project management part of our business built up a strong pipeline ofappointments during the year. Typically, this involved a degree of high levelstrategic advice that yielded significant fees and raised our profile. There wasalso a particular focus on the not-for-profit and public sectors, where ourimpartial specialist advice and professionalism is well recognised. In building surveying, we consolidated our position following new staffappointments and we now have a sound team for 2007. Of course, much of the work we do is behind the scenes and, due to theconfidential nature of our work with lenders, applicants and vendors, mustremain so. Dedication and discretion have been rewarded by engenderingincreasingly close relationships with a number of clients, which leads of courseto repeat business and word-of-mouth recommendations. Lender panel positions were maintained and increased in a number of cases duringthe year, with new entrants to the market anticipated in 2007. Looking to 2007, we foresee an increasing focus on niche and specialist marketssuch as dentists, clinics, health centres, supported living units and veterinarypractices. There will also be greater emphasis on work at the higher end of ourmarkets, producing correspondingly higher fees. Software solutions VCSTIMELESS, our provider of business software solutions, has its origins in theearly 1990s with the belief that electronic point of sale (EPoS) systemsrequired some form of continued external audit and therefore needed to providean interface to stock auditors. From its start in the hospitality sector, theoriginal company soon expanded into leisure, particularly multiplex cinemas.Following Christie Group's targeted acquisition of a specialist retail softwarecompany in 2000, we moved into the rapidly growing non-food retail sector aswell. Today, our software solutions encompass merchandise management, EPoS, CRM,supply chain optimisation and business intelligence applications. Thanks to theinternational nature of our clients, operations span the globe. During the year, VCSTIMELESS's revenues grew by 10% to a record £15.1 million.Software revenue increased by 15% thanks to significant market wins, and newbusiness represented 52% of total revenue, compared with 21% in 2005. However, despite these figures, VCSTIMELESS had a challenging year and reportedlosses. These were due to: • Late delivery of Colombus.next, which will be progressivelyavailable from 2007 • The requirement for additional new Colombus.next modules in thelight of changing customer demands • Increased focus and investment on large retailer accountscharacterised by long sales cycles and varying levels of commitment International scale In 2006 we consolidated our position as a truly international company, with 72%of our total revenue coming from international operations outside the UK. In France, where VCSTIMELESS has its retail origins, there was success insigning new, major higher-tier retail players. These included Veti, an apparelretailer with over 150 stores in France and 14 in Portugal and Comptoir desCotonniers with more than 210 stores in seven countries in Western Europe plusJapan. In the UK, new customers featured the country's second largest cinema chain,Vue. Also included was Hamleys, the world-famous toy retailer, which not onlyhas its famous shop in London but 12 more at major airports and in departmentstores, with another to open soon in a shopping mall in Dubai. Results in Canada were better than forecast, thanks in large part to thesuccessful roll-out of the cinema software we distribute in Cineplex, Canada'slargest cinema chain. Southern Europe saw gratifying sales and the addition of four major retailers tothe customer roster in Spain and Italy. A particularly welcome win was Blanco, afast-growing fashion retailer in the process of opening 30 stores every yearacross Europe. In the second half of 2006, we also strengthened our Spanish andItalian sales organisations by the appointment of a new country manager in Spainand a sales manager in Italy. Two factors guided the choice made by major new clients: firstly, sharedcommitment to innovation and international scope matching VCSTIMELESS's ownvision; secondly, our compelling new products and services. New products; higher profile By far the most important new product development in 2006 was the preparationfor the phased launch of Colombus.next. The latest in the highly successfulColombus range of products, Colombus.next is a uniquely advanced supply chainoptimisation, decision and planning solution for retailers using the latestMicrosoft technologies and service-oriented architecture. By the end of theyear, five tier-2 fashion retailers (Naf Naf, Orchestra, Cannelle, Tally Weijland Veti) had already selected Colombus.next. In addition, orders were received for our other new products, BeStore (EPoS) andColombus BI (Business Intelligence). In May 2006 we staged our third European User Conference, attracting a record350 delegates from Asia and Europe. In February, our flagship ColombusEnterprise won an award in Spain for the best retail management softwaresolution. The jury recognised its best in class features as well as itsinnovative use on the Tour de France, one of the world's most popular sportingevents, where we delivered an effective mobile store system. Strategy for success In 2006 we began a partnership with the Japanese third-party service providerPBC to secure training, help desk, project management and roll-out of ColombusEnterprise across Japan. As a result of this partnership, our proven EPoSsolution, Colombus Ret@il, is now available in Japanese - an option chosen byexisting clients Anne Fontaine and Bonpoint to support their Asian operations.Partnered by Microsoft we had the support of a vigorous worldwide salesorganisation enabling us to achieve heightened international status and expandour scope. On these solid foundations, and during the critical year ahead, our majorchallenges will include: • Successfully delivering an exemplary service to our first .nextcustomers in order to accelerate both the .next market and the sales process • Consolidating our cooperation and existing partnerships withthird-party companies that influence tier-1 and 2 businesses. Theseorganisations include Capgemini, BearingPoint and LogicaCMG • Accelerating the time to market of all future .next products inorder to secure revenues from our existing customer base • Improving profitability by financing further product development inpartnership with our high value customers Exciting opportunities ahead should yield continued growth across all ourregions. This growth will be based on sales generated by new products and by thestrengthening of our international business. Stock & inventory services Christie Group has been stocktaking on a significant commercial scale since1984, when we acquired Venners, a venerable family firm with roots in the 19thcentury and a specialist supplier to the licensed sector. Since then, we have expanded to become a leading supplier of stocktaking,inventory, control audit and related stock management services to thehospitality and retail sectors. More recently, our 2002 acquisition of Orridge,Europe's longest-established stocktaking business, enabled us to expand ourretail activities even further. These now include high street chains,warehouses, factories and supermarkets throughout the UK, and from ourcontinental European base in Belgium we now service customers in 13 countries.During 2007 we are targeting increased expansion in Europe, responding to andanticipating the needs of our international retailing clients. Profit in the division was held back in 2006 because of a re-equipping in thefirst half and the cost of an on-going and significant TUPE transfer in thesecond. The effects of this will continue into 2007. Venners Demand for our services in the hospitality sector heightened in 2006. Weconducted some 26,000 individual stock audits, which involved tallying almost 5million individual stock items. True to our roots, we won a broad cross-section of new clients in 2006. Thebiggest of these was Sodexho, the event caterers. As a result, we providedstocktaking and other services at some of the most prestigious events in theUK's social and sporting calendar. These included the Royal HorticulturalSociety's Chelsea Flower Show, the Open, the Derby, the Ryder Cup and RoyalAscot. Among the other major clients we acquired in 2006 were Thistle Hotels, LegacyHotels, Leisure Plex, British Country Inns and New Legion Clubs. Some of the support for these new clients was provided through our innovativeVenPowa system, a new software package that assists operators in the control oftheir stock movements. The conceptualisation, writing and implementation ofVenPowa took three months of intense development. We immediately deployed it ata number of clients' venues such as Twickenham Stadium. Also in 2006 we laid the groundwork for considerable volumes of new or repeatbusiness. We signed contracts with Foundation Group, International CurrencyExchange (ICE), Legacy Hotels, Thwaites and Residor SAS. Looking ahead,negotiations are underway with several major chains with some already committedto contracts that will start in early 2007. At a time when food hygiene has become an issue of increasing public concern, werevamped and re-launched an operational reporting template that encompassesstate-of-the-art food hygiene parameters. A year of high performance was marred by two receiverships (Barvest and London &Edinburgh Swallow Group) and also the closure of a protracted tribunal claimrelated to the collapse of the Unwins chain. Both of these hit our profits. As part of our focus on customer service we appointed a services director andimproved our year on year rating based on customer survey results. Orridge Throughout Europe, the retail sector increasingly regards stocktaking as anoutsourced activity. As specialists in this area, this is good news for us. Itperfectly places us to tap into this sizeable market - estimated in the UK aloneto be worth £90 million a year. Half of that is as yet unexploited, particularlyin certain sectors such as pharmacies. We are making the most of this situation. In 2006 a key objective was to increase our penetration across the variousbusiness activities of our existing clients. For example, work for the Co-op(for which we now do 5,500 audits per annum) was originally limited to theclient's pharmacy operations. Now it has expanded to include the supermarketpart of the business - a milestone in our determination to become a significantplayer in that sector. Work for Waterstones also grew as a result of itspurchase of Ottakers. Another way to grow revenues from existing clients is to increase the range ofservices we provide to them. Through our partnership with Ernst & Young, weassisted WHSmith with its delivery tracking. We also expanded our services toNew Look by developing our supply chain offering; in particular, delivery checksincluding exports. At Woolworth's we ensured that the accuracy of stock at itsonline distribution centre was ready for the Christmas rush. During the year we also took advantage of the synergies between Christie Groupcompanies. For example, we worked closely with VCSTIMELESS on a widening rangeof accounts including Louis Pion-Royal Quartz, a chain of 30 jewellers inFrance, Italian lingerie retailer Loveable and Mer du Nord, the Belgian fashionretailer. The two companies also collaborated on retail promotion. Other noteworthy Orridge achievements during 2006 included: • Securing Savers as a client - part of the AS Watson Group • Rolling out 1,300 new scanners to all our field staff • Restructuring of our IT help desk • Completing the rollout of wireless LAN field technology • Developing a technology-based distribution solution for B&Q andSomerfield • Joining with Ernst & Young in a supply chain partnership • Increasing our northern region management to support the additionalwork from the Co-op and Superdrug • Appointing a divisional head for our pharmacy work, to reflect itsgrowing importance as part of our business mix • Re-structuring the board of directors in order to increaseefficiency and re-align responsibilities To consolidate these achievements and continue to grow, we have developed acomprehensive strategy for 2007. This includes continued focus on thesupermarket sector, heightened brand awareness in retail and a drive to agreelonger term contracts with as many of our customers as possible, to mutualbenefit. Our staff training and development will concentrate on the skillsneeded to drive sales. David RuggChief Executive Consolidated income statement - AuditedFor the year ended 31 December 2006 Note 2006 2005 £'000 £'000Revenue 5 87,096 77,506Employee benefit expenses 6 (50,949) (45,832) 36,147 31,674Depreciation and amortisation (1,298) (1,292)Other operating expenses (28,770) (25,973)Operating Profit 5 6,079 4,409Finance costs 7 (274) (249)Finance income 7 347 221Total finance credit/(costs) 7 73 (28)Profit before tax 8 6,152 4,381Taxation 9 (2,019) (1,694)Profit for the year after tax 4,133 2,687 Attributable to:Equity Shareholders of the parent 4,131 2,684Minority interest 2 3 4,133 2,687 Earnings per share -Basic 11 16.90p 10.79p -Fully diluted 11 16.41p 10.69p All the amounts derive from continuing activities. Consolidated Statement of changes in shareholders' equity - Audited As at 31 December 2006 Attributable to the Equity Holders of the Company Share Fair value Cumulative Retained Minority capital and other translation earnings Interest Total reserves reserve Equity (Note 20) £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 January 2005 495 4,484 (347) 3,002 16 7,650Exchange difference on repayment offoreign exchange loan - - 158 (158) - -Currency translation adjustments - - (40) - - (40)Net income/(expenses) recognised - - 118 (158) - (40)directly in equityProfit for the year - - - 2,684 3 2,687Total recognised income for the year - - 118 2,526 3 2,647Issue of share capital 5 109 - - - 114Movement in respect of employee sharescheme - 64 - - - 64Employee share option scheme:- value of services provided - 65 - - - 65Dividends paid - - - (726) - (726)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) for - - (153) 4,131 2 3,980the yearIssue of share capital 4 105 - - - 109Movement in respect of employee share - (523) - - - (523)schemeEmployee share option scheme:- value of services provided - 106 - - - 106Purchase of minority interest - - - (15) (21) (36)Dividends paid - - - (917) - (917)Balance at 31 December 2006 504 4,410 (382) 8,001 - 12,533 Consolidated Balance sheet - AuditedAs at 31 December 2006 Note 2006 2005 £'000 £'000AssetsNon-current assetsIntangible assets - Goodwill 12 4,096 3,939Intangible assets - Other 13 3,166 2,810Property, plant and equipment 14 2,214 2,179Deferred tax assets 15 2,176 1,977Available-for-sale financial assets 16a 300 300 11,952 11,205Current assetsInventories 17 332 310Trade and other receivables 18 14,279 14,117Current tax assets 282 -Cash and cash equivalents 11,414 6,811 26,307 21,238Total assets 38,259 32,443EquityCapital and reserves attributable to the Company's equity holdersShare capital 19 504 500Fair value and other reserves 20 4,410 4,722Cumulative translation reserve (382) (229)Retained earnings 20 8,001 4,802 12,533 9,795Minority interest - 19Total equity 12,533 9,814LiabilitiesNon-current liabilitiesBorrowings 23 1,735 2,221Retirement benefit obligations 21 6,300 6,790 8,035 9,011Current liabilitiesTrade and other payables 22 16,954 12,748Current tax liabilities - 732Borrowings 23 737 138 17,691 13,618Total liabilities 25,726 22,629Total equity and liabilities 38,259 32,443 These consolidated financial statements have been approved for issue by theBoard of Directors on 29 March 2007. Consolidated Cash Flow Statement - AuditedFor the year ended 31 December 2006 2006 2005 Note £'000 £'000Cash flow from operating activitiesCash generated from operations 24a 10,578 6,772Interest paid (274) (249)Tax paid (3,233) (214)Net cash generated from operating activities 7,071 6,309Cash flow from investing activitiesAcquisition of subsidiary (net of cash acquired) 24b - (79)Purchase of minority interest in subsidiary (36) -Purchase of property, plant and equipment (PPE) (1,407) (858)Proceeds from sale of PPE 156 132Intangible assets expenditure (1,503) (1,712)Proceeds from disposal of intangible assets 13 1,193 -Proceeds from sale of available-for-sale asset - 70Increased investment in available-for-sale asset - (200)Interest received 347 221Net cash used in investing activities (1,250) (2,426)Cash flow from financing activitiesProceeds from issue of share capital 109 114(Payments to)/proceeds from ESOP (523) 64Proceeds from borrowings - 510Repayment of borrowings (82) (277)Payments of finance lease liabilities (59) (111)Dividends paid (917) (726)Net cash used in financing activities (1,472) (426)Net increase in net cash (including bank overdrafts) 4,349 3,457Cash and bank overdrafts at beginning of year 6,811 3,354Cash and bank overdrafts at end of year 11,160 6,811 Company Statement of changes in shareholders' equity - Audited As at 31 December 2006 Attributable to the Equity Holders of the Company Share capital Fair value and other Retained Total equity reserves (Note 20) earnings £'000 £'000 £'000 £'000 Balance at 1 January 2005 495 4,535 7,817 12,847Profit for the year - - 2,417 2,417Total recognised income for the year - - 2,417 2,417Issue of share capital 5 109 - 114Movement in respect of employee sharescheme - 64 - 64Dividends paid - - (726) (726)Balance at 1 January 2006 500 4,708 9,508 14,716Profit for the year - - 2,275 2,275Total recognised income for the year - - 2,275 2,275Issue of share capital 4 105 - 109Movement in respect of employee share - (523) - (523)schemeEmployee share options scheme - value - 1 - 1of services providedDividends paid - - (917) (917)Balance at 31 December 2006 504 4,291 10,866 15,661 Company Balance sheet - AuditedAs at 31 December 2006 Note 2006 2005 £'000 £'000AssetsNon-current assetsInvestments in subsidiaries 16 11,250 11,250Deferred tax assets 15 174 172Available-for-sale financial assets 16a 300 300Other receivables 18 6,058 - 17,782 11,722Current assetsTrade and other receivables 18 3,333 7,504Current tax assets 1,528 -Cash and cash equivalents 6,489 4,321 11,350 11,825Total assets 29,132 23,547EquityCapital and reserves attributable to the Company's equity holdersShare capital 19 504 500Fair value and other reserves 20 4,291 4,708Retained earnings 20 10,866 9,508Total equity 15,661 14,716LiabilitiesNon-current liabilitiesBorrowings 23 1,600 2,000Retirement benefit obligations 21 578 613 2,178 2,613Current liabilitiesTrade and other payables 22 10,893 5,452Current tax liabilities - 766Borrowings 23 400 - 11,293 6,218Total liabilities 13,471 8,831Total equity and liabilities 29,132 23,547 These Company financial statements have been approved for issue by the Board ofDirectors on 29 March 2007. David RuggChief Executive Robert ZenkerFinance Director Company Cash Flow Statement - AuditedFor the year ended 31 December 2006 Note 2006 2005 £'000 £'000Cash flow from operating activitiesCash used in operations 24a (582) (1,132)Interest paid (260) (264)Tax (paid)/received (1,527) 1,155Net cash used in operating activities (2,369) (241)Cash flow from investing activitiesProceeds from sale of available-for-sale financial asset - 70Investment in available-for-sale financial asset - (200)Investment income from fixed asset investments 5,350 2,778Interest received 518 439Net cash generated from investing activities 5,868 3,087Cash flow from financing activitiesProceeds from issue of share capital 109 114(Payments to)/proceeds from ESOP (523) 64Dividends paid (917) (726)Net cash used in financing activities (1,331) (548)Net increase in net cash 2,168 2,298Cash at beginning of year 4,321 2,023Cash at end of year 6,489 4,321 Notes to the Consolidated Financial Statements - Audited 1. General information Christie Group plc is the parent undertaking of a group of companies covering arange of related activities. These fall into three divisions - ProfessionalBusiness Services, Software Solutions and Stock and Inventory Services.Professional Business Services principally covers business valuation,consultancy and agency, mortgage and insurance services, and business appraisal. Software Solutions covers EPoS, head office systems and supply chainmanagement. Stock and Inventory Services covers stock audit and inventorypreparation and valuation. 2. Summary of significant accounting policies Accounting policies for the year ended 31 December 2006 The principal accounting policies adopted in the preparation of these financialstatements are set out below. 2.1 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 standardsand IFRIC interpretations issued and effective or issued and early adopted as atthe time of preparing these statements (March 2007). 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 4. Interpretations and amendments to published standards effective in 2006 The following amendments and interpretations to standards are mandatory for theGroup's accounting periods beginning on or after 1 January 2006. - IAS 19 (Amendment), Employee Benefits (effective from 1 January2006). This amendment introduced the option of an alternative recognitionapproach for actuarial gains and losses. It also imposed additional recognitionrequirements for multi-employer plans where insufficient information isavailable to apply defined benefit accounting. It also added new disclosurerequirements. As the Group has not changed the accounting policy adopted forrecognition of actuarial gains and losses the adoption of this amendment hasonly impacted the format and extent of disclosures presented in the financialstatements. It is anticipated that mandatory new standards or interpretations, effective foraccounting periods beginning on or after 1 January 2006, 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 2007 or later periods but which the group has not earlyadopted, are as follows: - IFRIC 8, Scope of IFRS 2 (effective for accounting periods beginningon or after 1 May 2006). This interpretation requires consideration oftransactions 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 Group will apply IFRIC 8 from 1 January 2007, but it is notexpected to have any impact on the Group's financial statements. - IFRIC 10, Interim Financial Reporting and Impairment (effective foraccounting periods beginning on or after 1 November 2006). IFRIC 10 prohibitsthe impairment losses recognised in an interim period on goodwill, investmentsin equity instruments and investments in financial assets carried at cost to bereversed at a subsequent balance sheet date. The Group will apply IFRIC 10 from1 January 2007, but it is not expected to have any impact on the Group'sfinancial statements. - 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. Management is currently assessing the impact of IFRIC 11 on theGroup's operations. - IFRS 7, Financial instruments: Disclosures, and the complementaryAmendment to IAS 1, Presentation of Financial Statements - Capital Disclosures(effective for accounting periods beginning on or after 1 January 2007). IFRS 7introduces new disclosures relating to financial instruments. This standarddoes not have any impact on the classification and valuation of the Group'sfinancial instruments. - 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. It is anticipated that new standards or interpretations, currently in issue atthe time of preparing these financial statements (March 2007), not coveredspecifically above will have no impact on the Group's financial statements. 2.2 ConsolidationThe Group financial statements include the results of Christie Group plc and allits subsidiary undertakings on the basis of their financial statements to 31December 2006. The results of businesses acquired or disposed of are includedfrom the date of acquisition or disposal. A subsidiary is an entity controlled, directly or indirectly, by Christie Groupplc. Control is regarded as the power to govern the financial and operatingpolicies of the entity so as to obtain the benefits from its activities. 2.3 Foreign currency translation Functional and presentation currency Items included in the financial statements of each of the Group's entities aremeasured using the currency of the primary economic environment in which theentity operates ('the functional currency'). The consolidated financialstatements are presented in pounds sterling, which is the Company's functionaland presentation currency. Transactions and balances Foreign currency transactions are translated into the functional currency usingthe exchange rates prevailing at the dates of the transactions. Foreignexchange gains and losses resulting from the settlement of such transactions andfrom the translation at year-end exchange rates of monetary assets andliabilities denominated in foreign currencies are recognised in the incomestatement. Group companies The results and financial position of all the group entities (none of which hasthe currency of a hyperinflationary economy) that have a functional currencydifferent from the presentation currency are translated into the presentationcurrency as follows: a) assets and liabilities for each balance sheet presented are translated at theclosing rate at the date of that balance sheet; b) income and expenses for each income statement are translated at averageexchange rates; and c) all resulting exchange differences are recognised as a separate component ofequity, the cumulative translation reserve. On consolidation, exchange differences arising from the translation of the netinvestment in foreign entities, and of borrowings, are taken to shareholders'equity. When a foreign operation is sold, such exchange differences arerecognised in the income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreignentity are treated as assets and liabilities of the foreign entity andtranslated at the closing rate. 2.4 Revenue recognition Revenue comprises the fair value of the consideration received or receivable forthe sale of goods and services provided in the ordinary course of the Group'sactivities. Revenue derived from the Group's principal activities (which isshown exclusive of applicable sales taxes or equivalents) is recognised asfollows: Agency, consultancy and valuations Net agency fees are recognised as income on exchange of contracts. Consultancyincome is recognised in the accounting period in which the service is rendered,assessed on the basis of actual service provided as a proportion of the totalservices to be provided. In respect of valuations, turnover is recognised oncethe property or business has been inspected. Appraisal income is recognised inthe accounting period in which the service is rendered, assessed on the basis ofactual service provided as a proportion of the total services to be provided. Business mortgage broking Fee income is taken either when a loan offer is secured or when the loan isdrawn down. Insurance broking Insurance brokerage is accounted for on an accruals basis when the insurancepolicy commences. Software solutionsHardware revenues are recognised on installation or as otherwise specified inthe terms of the contract. Software revenues are recognised on delivery or asotherwise specified in the terms of the contract. Revenues on maintenancecontracts are recognised over the period of the contract. Revenue in respect ofServices, such as implementation, training and consultancy, are recognised whenthe services are performed. Stock and inventory servicesFees are recognised on completion of the visit to client's premises. Other income is recognised as follows: Interest income Interest income is recognised on a time-proportion basis using the effectiveinterest method. Dividend income Dividend income is recognised when the right to receive payment is established. 2.5 Segmental reporting In accordance with the Group's risks and returns, the definition of segments forprimary and secondary segment reporting reflects the internal managementreporting structure. A business segment is a group of assets and operationsengaged in providing products or services that are subject to risks and returnsthat are different from those of other business segments. Segment expensesconsist of directly attributable costs and other costs, which are allocatedbased on relevant criteria. A geographical segment is engaged in providing products or services within aparticular economic environment that are subject to risks and returns that aredifferent from those of components operating in other economic environments. 2.6 Intangible assets Goodwill On the acquisition of a business, fair values are attributed to the net assetsacquired. Goodwill arises on the acquisition of subsidiary undertakings,representing any excess of the fair value of the consideration given over thefair value of the identifiable assets and liabilities acquired. Goodwillarising on acquisitions is capitalised and subject to impairment review, bothannually and when there are indications that the carrying value may not berecoverable. Goodwill arising on acquisitions prior to the date of transition to IFRS hasbeen retained at previous UK GAAP amounts as permitted by IFRS 1 'First timeadoption of International Accounting Standards'. Prior to 1 January 2004,goodwill was amortised over its estimated useful life, such amortisation ceasedon 31 December 2003, subject to an impairment review at the date of transition,in which no impairment was recognised. The Group's policy for the years up to31 March 1998 was to eliminate goodwill arising on acquisitions againstreserves. As permitted by IFRS 1 and IFRS 3, such goodwill remains eliminatedagainst reserves. Research and development Software development is capitalised at cost when the following criteria aredemonstrated: - The technical feasibility of completing the product so that it willbe available for use or sale; - The intention to complete the product and use or sell it; - The ability to use the completed product or sell it; - It is probable that the completed product will generate futureeconomic benefits; - The availability of adequate technical, financial and otherresources to complete the development and to use or sell the completed product;and - The ability to reliably measure the expenditure on the intangibleasset during its development. Development costs are amortised in equal annual instalments over the expectedproduct or system life, commencing in the year when the product is completed.Development costs previously recognised as an expense are not recognised as anasset in a subsequent period. All other research and development costs arewritten off in the year in which they are incurred. Other Intangible fixed assets such as software, trademarks and patent rights arestated at cost, net of amortisation and any provision for impairment.Amortisation is calculated to write down the cost of all intangible fixed assetsto their estimated residual value by equal annual instalments over theirexpected useful economic lives. The expected useful lives are between three andten years. 2.7 Property, plant and equipment Tangible fixed assets are stated at cost, net of depreciation and provision forany impairment. Depreciation is calculated to write down the cost of alltangible fixed assets to estimated residual value by equal annual instalmentsover their expected useful lives as follows: Leasehold property Lease term Fixtures, fittings and equipment 5 - 10 years Computer equipment 2 - 3 years Motor vehicles 4 years The assets' residual values and useful lives are reviewed, and adjusted ifappropriate, at each balance sheet date. An asset's carrying amount is writtendown immediately to its recoverable amount if the asset's carrying amount isgreater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the disposal proceedswith the carrying amount and are included in the income statement. 2.8 LeasesLeases where the lessor retains a significant portion of the risks and rewardsof ownership are classified as operating leases. Rentals under operating leases(net of any incentives received) are charged to the income statement on astraight-line basis over the period of the lease. Assets, held under finance leases, which confer rights and obligations similarto those attached to owned assets, are capitalised as tangible fixed assets andare depreciated over the shorter of the lease terms and their useful lives. Thecapital elements of future lease obligations are recorded as liabilities, whilstthe interest elements are charged to the income statement over the period of theleases at a constant rate. 2.9 Impairment of assets Non-current assets are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount may not be recoverable. Animpairment loss is recognised for the amount by which the asset's carrying valueexceeds its recoverable amount. The recoverable amount is the higher of anasset's fair value less costs to sell and value in use. Value in use is basedon the present value of the future cash flows relating to the asset. For thepurposes of assessing impairment, assets are grouped at the lowest levels forwhich there are separately identifiable cash flows (cash generating units). Any assessment of impairment based on value in use takes account of the timevalue of money and the uncertainty or risk inherent in the future cash flows.The discount rates applied are post-tax and reflect current market assessmentsof the time value of money and the risks specific to the asset for which thefuture cash flow estimates have not been adjusted. 2.10 Investments The Group classifies its investments depending on the purpose for which theinvestments were acquired. Management determines the classification of itsinvestments at initial recognition and re-evaluates this designation at everyreporting date. Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are eitherdesignated in this category or not classified in any of the other categories.They are included in non-current assets unless management intends to dispose ofthe investment within 12 months of the balance sheet date. Purchases and sales of investments are recognised on trade date, the date onwhich the Group commits to purchase or sell the asset. Investments are initiallyrecognised at fair value plus transaction costs for all financial assets notcarried at fair value through profit or loss. Investments are derecognised whenthe rights to receive cash flows from the investments have expired or have beentransferred and the Group has transferred substantially all risks and rewards ofownership. Available-for-sale financial assets and financial assets at fairvalue through profit or loss are subsequently carried at fair value. Loans andreceivables and held-to-maturity investments are carried at amortised cost usingthe effective interest method. Realised and unrealised gains and losses arisingfrom changes in the fair value of the 'financial assets at fair value throughprofit or loss' category are included in the income statement in the period inwhich they arise. Unrealised gains and losses arising from changes in the fairvalue of non-monetary securities classified as available-for-sale are recognisedin equity. When securities classified as available-for-sale are sold orimpaired, the accumulated fair value adjustments are included in the incomestatement as gains and losses from investment securities The fair values of quoted investments are based on current bid prices. If themarket for a financial asset is not active (and for unlisted securities), theGroup establishes fair value by using valuation techniques. These include theuse of recent arm's length transactions, reference to other instruments that aresubstantially the same, discounted cash flow analysis, and option pricing modelsrefined to reflect the issuer's specific circumstances. The Group assesses at each balance sheet date whether there is objectiveevidence that a financial asset or a group of financial assets is impaired. Inthe case of equity securities classified as available for sale, a significant orprolonged decline in the fair value of the security below its cost is consideredin determining whether the securities are impaired. If any such evidence exists for available-for-sale financial assets, thecumulative loss - measured as the difference between the acquisition cost andthe current fair value, less any impairment loss on that financial assetpreviously recognised in profit or loss - is removed from equity and recognisedin the income statement. Impairment losses recognised in the income statement onequity instruments are not reversed through the income statement. 2.11 Inventories Inventory held for resale is valued at the lower of cost and net realisablevalue. 2.12 Trade receivables Trade receivables are recognised initially at fair value and subsequentlymeasured at amortised cost using the effective interest method, less provisionfor impairment. A provision for impairment of trade receivables is establishedwhen there is objective evidence that the Group will not be able to collect allamounts due according to the original terms of receivables. The amount of theprovision is the difference between the asset's carrying amount and the presentvalue of estimated future cash flows, discounted at the effective interest rate.The amount of the provision is recognised in the income statement. 2.13 Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. Cash andcash equivalents comprise cash in hand, deposits held at call with banks, othershort-term, highly liquid investments with original maturities of three monthsor less, and bank overdrafts. Bank overdrafts are included within borrowings incurrent liabilities on the balance sheet. 2.14 Borrowings Borrowings are recognised initially at fair value, net of transaction costsincurred. Borrowings are subsequently stated at amortised cost; any differencebetween proceeds (net of transaction costs) and the redemption value isrecognised in the income statement over the period of the borrowings using theeffective interest method. Borrowings are classified as current liabilities unless the Group has anunconditional right to defer settlement of the liability for at least 12 monthsafter the balance sheet date. 2.15 Taxation including deferred tax Tax on company profits is provided for at the current rate applicable in each ofthe relevant territories. Deferred tax is provided in full, using the liability method, on temporarydifferences arising between the tax bases of assets and liabilities and theircarrying amounts in the consolidated financial statements. However, if thedeferred tax arises from initial recognition of an asset or liability in atransaction other than a business combination that at the time of thetransaction affects neither accounting nor taxable profit or loss, it is notaccounted for. Deferred tax is determined using tax rates (and laws) that havebeen enacted or substantially enacted by the balance sheet date and are expectedto apply when the related deferred tax asset is realised or the deferred taxliability is settled. Deferred tax assets are recognised to the extent that it is probable that futuretaxable profit will be available against which the temporary differences can beutilised. This is reviewed annually. 2.16 Share capital and share premium Ordinary shares are classified as equity. Where any Group company or the Employee Share Ownership Plan (ESOP) trustpurchases the Company's equity share capital (own shares), the considerationpaid, including any directly attributable incremental costs (net of taxes), isdeducted from equity attributable to the Company's equity holders until theshares are cancelled, reissued or disposed of. Where such shares aresubsequently sold or reissued, any consideration received, net of any directlyattributable incremental transaction costs and the related tax effects, isincluded in equity attributable to the Company's equity holders. 2.17 Dividend distribution Dividend distribution to the Company's shareholders is recognised as a liabilityin the Group's financial statements in the period in which the dividends areapproved by the Company's shareholders. In respect of interim dividends, whichare paid prior to approval by the Company's shareholders they are recognised onpayment. 2.18 Employee benefits Pension obligations The Group has both defined benefit and defined contribution schemes. A definedbenefit scheme is a pension scheme that defines the amount of pension benefitthat an employee will receive on retirement, usually dependent on one or morefactors such as age, years of service and remuneration. A defined contributionscheme is a pension scheme under which the Group pays fixed contributions into aseparate entity. The schemes are generally funded through payments to insurancecompanies or trustee-administered funds, determined by periodic actuarialcalculations. Pension obligations - Defined benefit schemes The liability recognised in the balance sheet in respect of defined benefitpension schemes is the present value of the defined benefit obligation at thebalance sheet date less the fair value of scheme assets, together withadjustments for unrecognised actuarial gains or losses and past service costs.The defined benefit obligation is calculated annually by independent actuariesusing the projected unit credit method. The present value of the defined benefitobligation is determined by discounting the estimated future cash outflows usinginterest rates of high-quality corporate bonds that are denominated in thecurrency in which the benefits will be paid, and that have terms to maturityapproximating to the terms of the related pension liability. Cumulative actuarial gains and losses arising from experience adjustments andchanges in actuarial assumptions in excess of the greater of 10% of the value ofscheme assets or 10% of the defined benefit obligation are charged or creditedto the income statement over the employees' expected average remaining workinglives. Past-service costs are recognised immediately in the income statement, unlessthe changes to the pension scheme are conditional on the employees remaining inservice for a specified period of time (the vesting period). In this case, thepast-service costs are amortised on a straight-line basis over the vestingperiod. Pension obligations - Personal pension scheme Group companies contribute towards a personal pension scheme for theirparticipating employees. These employees are currently entitled to suchcontributions after a qualifying period has elapsed. Payments to the scheme arecharged as an employee benefit expense as they fall due. The Group has nofurther payment obligations once the contributions have been paid. Share based compensation The fair value of employee share option schemes, including Save As You Earn(SAYE) schemes, is measured by a Black-Scholes pricing model. Further detailsare set out in Note 19a. In accordance with IFRS 2 'Share-based Payments' theresulting cost is charged to the income statement over the vesting period of theoptions. The value of the charge is adjusted to reflect expected and actuallevels of options vesting. No expense was recognised in respect of share options granted before 7 November2002 and those which had vested before 1 January 2005. The expense isrecognised when the options are exercised and proceeds received allocatedbetween share capital and share premium. For share options granted after 7 November 2002 and vested after 1 January 2005the Group operates an equity-settled, share option scheme designed to alignmanagement interests with those of shareholders. The fair value of theemployee's services received in exchange for the grant of the options isrecognised as an expense. The total amount to be expensed over the vestingperiod is determined by reference to the fair value of the options granted,excluding the impact of any non-market vesting conditions (for example,profitability and sales growth targets). Non-market vesting conditions areincluded in assumptions about the number of options that are expected to becomeexercisable. At each balance sheet date, the entity revises its estimates of thenumber of options that are expected to become exercisable. It recognises theimpact of the revision of original estimates, if any, in the income statement,and a corresponding adjustment to equity. The proceeds received net of anydirectly attributable transaction costs are credited to share capital (nominalvalue) and share premium when the options are exercised. Commissions and bonus plans The Group recognises a liability and an expense for commissions and bonuses,based on formula driven calculations. The Group recognises a provision wherecontractually obliged or where there is a past practice that has created aconstructive obligation. 3. Financial risk management The Group uses a limited number of financial instruments, comprising cash,short-term deposits, bank loans and overdrafts and various items such as tradereceivables and payables, which arise directly from operations. The Group doesnot trade in financial instruments. 3.1 Financial risk factors The Group's activities expose it to a variety of financial risks: market risk(including currency risk, and interest rate risk), credit risk, liquidity riskand cash flow interest rate risk. The Group's overall risk management programmefocuses on the unpredictability of financial markets and seeks to minimisepotential adverse effects on the Group's financial performance. a) Market risk Foreign exchange risk The Group operates internationally and is exposed to foreign exchange riskarising from various currency exposures, primarily with respect to the UK poundand the Euro. Foreign exchange risk arises from future commercial transactions,recognised assets and liabilities and net investments in foreign operations. Foreign exchange risk arises when future commercial transactions or recognisedassets or liabilities are denominated in a currency that is not the entity'sfunctional currency. The Group has certain investments in foreign operations, whose net assets areexposed to foreign currency translation risk. b) Credit risk The Group has no significant concentrations of credit risk and has policies inplace to ensure that sales are made to customers with an appropriate credithistory. A number of subsidiaries utilise credit insurance to mitigate creditrisk. c) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash andavailable funding through an adequate amount of committed credit facilities.The Group ensures it has adequate cover through the availability of bankoverdraft and loan facilities. d) Cash flow and interest rate risk The Group finances its operations through a mix of cash flow from currentoperations together with cash on deposit and bank and other borrowings.Borrowings are generally at floating rates of interest and no use of interestrate swaps has been made. Overall the Group's trading operations are normallycash generative. 3.2 Fair value estimation The nominal value less impairment provision of trade receivables and payablesare assumed to approximate their fair values. The fair value of financialliabilities for disclosure purposes is estimated by discounting the futurecontractual cash flows at the current market interest rate that is available tothe Group for similar financial instruments. 4. 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. 4.1 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 stated in Note 2.6. The recoverable amounts ofcash-generating units have been determined based on value-in-use calculations.These calculations require the use of estimates (Note 12). (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, as stated in Note 21, may differ materiallyfrom actual results, and these differences may result in a significant impact onthe amount of pension expense recorded in future periods. In accordance withIAS 19, the group amortises actuarial gains and losses outside the 10% corridor,over the average future service lives of employees. Under this method, majorchanges in assumptions, and variances between assumptions and actual results,may affect retained earnings over several future periods rather than one period,while more minor variances and assumption changes may be offset by other changesand have no direct effect on retained earnings. 5. 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 2006 are as follows: Stock and Inventory Professional Business Software Services Services Solutions Other Group £'000 £'000 £'000 £'000 £'000 Continuing OperationsTotal gross segment revenue 49,739 15,053 22,337 2,777 89,906 Inter-segment revenue (33) - - (2,777) (2,810)Revenue 49,706 15,053 22,337 - 87,096Operating profit 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 The segment results for the year ended 31 December 2005 are as follows: Professional Business Stock and Services Inventory Software Services £'000 Solutions Other Group £'000 £'000 £'000 £'000 Continuing OperationsTotal gross segment revenue 43,289 13,714 20,536 2,554 80,093Inter-segment revenue (33) - - (2,554) (2,587)Revenue 43,256 13,714 20,536 - 77,506Operating profit 4,519 (1,268) 1,356 (198) 4,409Net finance costs (28)Profit before tax 4,381Taxation (1,694)Profit for the year after tax 2,687 Other segment items included in the income statements for the years ended 31December 2006 and 2005 are as follows: Professional Stock and Business Services Inventory Software Services £'000 Solutions Other Group £'000 £'000 £'000 £'000 31 December 2006Depreciation and amortisation 557 333 379 29 1,298Impairment of trade receivables 701 382 55 - 1,13831 December 2005Depreciation and amortisation 673 304 269 46 1,292Impairment of trade receivables 644 166 2 - 812 The segment assets and liabilities at 31 December 2006 and capital expenditurefor the year then ended are as follows: Professional Stock and Business Services Inventory Software Services £'000 Solutions Other Group £'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 The segment assets and liabilities at 31 December 2005 and capital expenditurefor the year are as follows; Professional Stock and Business Services Inventory Software Services £'000 Solutions Other Group £'000 £'000 £'000 £'000 Assets 12,168 9,937 4,707 3,654 30,466Deferred tax assets 1,977 32,443Liabilities 10,066 3,507 4,006 2,024 19,603Current tax liabilities 732Borrowings (excluding finance leases) 2,294 22,629 Capital expenditure 1,130 1,224 187 29 2,570 Segment assets consist primarily of property, plant and equipment, intangibleassets, inventories, receivables and operating cash. They exclude deferredtaxation. 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 revenue is mainly in Europe. Revenue is allocated based on thecountry in which the customer is located. 2006 2005 £'000 £'000RevenueEurope 86,435 77,080Rest of the World 661 426 87,096 77,506 Total segment assetsEurope 35,666 30,169Rest of the World 135 297 35,801 30,466 Capital expenditure is allocated based on where the assets are located. 2006 2005 £'000 £'000Capital expenditureEurope 3,058 2,570 2006 2005 £'000 £'000Analysis of revenue by categorySales of goods 6,709 2,568Revenue from services 80,387 74,938 87,096 77,5066. Employee benefit expenses 2006 2005Staff costs for the Group during the year £'000 £'000 Wages and salaries 40,657 36,588Social security costs 6,255 5,387Other benefits 2,485 2,335Pension costs - defined benefit schemes (Note 21) 1,058 1,169Pension costs - defined contribution scheme 388 288Cost of employee share scheme 106 65 50,949 45,832 The amounts included in employee benefit expenses in 2005 have been amended toinclude certain expenditure previously included in other operating expenses.The reclassification has no effect on operating profit. Average number of people (including executive directors) employed by the Group 2006 2005during the year was Number NumberOperational 1,039 1,025Administration and support staff 303 305 1,342 1,330 7. Finance (credit)/costs 2006 2005 £'000 £'000Interest payable on bank loans and overdrafts 267 242Other interest payable 5 -Interest payable on finance leases 2 7Total finance costs 274 249Bank interest receivable (335) (126)Other interest receivable (12) (95)Total finance income (347) (221)Net finance (credit)/costs (73) 28 8. Profit before tax Group 2006 2005 £'000 £'000Profit before tax is stated after charging/(crediting):Depreciation of property, plant and equipment - owned assets 1,196 1,125 - under finance leases 53 126Amortisation of intangible fixed assets 49 41Profit on sale of property, plant and equipment (47) (20)Loss on sale of intangible fixed asset 19 -Profit on sale of current available for sale financial assets (including Company £nil - (176)(2005: £176,000))Operating lease charges - buildings 1,741 1,412 - other 1,162 752Repairs and maintenance expenditure on property, plant and equipment 337 397Research and non-capitalised development costs 1,486 1,308Loss on foreign exchange (including Company £45,000 (2005: £31,000)) 11 28Inventories- (credit)/cost of inventories recognised as an expense (included in other operating expenses) (27) 41- write down of inventories 8 1 Services provided by the group's auditor and network firms During the year the group (including its overseas subsidiaries) obtained thefollowing services from the group's auditor or a network firm of the group'sauditor as detailed below: Group Company 2006 2005 2006 2005 £'000 £'000 £'000 £'000Audit services- audit of the parent company and consolidated financial statements 21 18 21 18 - audit of the subsidiary company financial statements 113 109 - -Other services pursuant to legislation 13 12 5 5Tax services 145 130 87 55Other services not covered above 19 33 - - In addition to the above services, the Group's auditor acted as auditor to theChristie Group plc Pension & Assurance Scheme and the VennersRetirement Benefit Scheme. The appointment of auditors to the Group's pensionschemes and the fees paid in respect of those audits are agreed by thetrustees of each scheme, who act independently from the management ofthe Group. The aggregate fees paid to the Group's auditor for audit servicesto the pension schemes during the year were £9,500 (2005: £9,000). 9. Taxation 2006 2005 £'000 £'000Current taxUK Corporation tax at 30% (2005: 30%) 2,406 1,324Foreign tax 73 57Adjustment in respect of prior periods (267) (37)Total current tax 2,212 1,344Deferred taxOrigination and reversal of timing differences (193) 350Total deferred tax (193) 350Tax on profit on ordinary activities 2,019 1,694 The tax for the year is higher (2005: higher) than the standard rate ofcorporation tax in the UK (30%). The differences are explained below: Tax on profit on ordinary activities 2006 2005 £'000 £'000Profit on ordinary activities before tax 6,152 4,381Profit on ordinary activities at standard rate of UK corporation tax of 30% (2005: 30%) 1,846 1,314Effects of: - tax losses not yet utilised 716 236 - expenses not deductible for tax purposes 478 105 - taxable deductions (638) - - utilisation of tax losses and other deductions (5) - - adjustment to tax charge in respect of previous periods (267) (37) - fixed asset timing differences 62 (15) - other timing differences 26 (259) - rate differential on certain tax losses (6) -Total current tax 2,212 1,344 10. Dividends 2006 2005Group and Company £'000 £'000Interim2005 interim, paid October 2005 (1.0p) - 2452006 interim, paid October 2006 (1.25p) 306 -Final2004 final, paid June 2005 (2.0p) - 4812005 final, paid June 2006 (2.5p) 611 - 917 726 A dividend in respect of the year ended 31 December 2006 of 2.75p per share,amounting to a total dividend of £677,000, is to be proposed at the AnnualGeneral Meeting on 29 June 2007. These financial statements do not reflect thisproposed dividend. 11. 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. 2006 2005Profit attributable to equity holders of the Company (£'000) 4,131 2,684Weighted average number of ordinary shares in issue (thousands) 24,448 24,866Basic earnings per share (pence) 16.90 10.79 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. 2006 2005Profit attributable to equity holders of the Company (£'000) 4,131 2,684Weighted average number of ordinary shares in issue (thousands) 24,448 24,866Adjustment for share options (thousands) 728 249Weighted average number of ordinary shares for diluted earnings per share (thousands) 25,176 25,115Diluted earnings per share (pence) 16.41 10.69 12. Intangible assets - GoodwillGroup Total £'000CostAt 1 January 2006 3,939Acquisitions 157At 31 December 2006 4,096 Group Total £'000CostAt 1 January 2005 3,918Acquisitions 21At 31 December 2005 3,939 Goodwill is allocated to the Group's cash-generating units (CGUs) identifiedaccording to country of operation and business segment. The carrying amounts ofgoodwill by segment as at 31 December 2006 are as follows: Goodwill Professional Business Stock and Inventory Services Services Software Solutions £'000 £'000 £'000UK 178 - 833Continental Europe - 3,085 - During the year, the acquired goodwill was tested for impairment in accordancewith IAS 36 on the basis of the relevant CGUs. Following the impairment teststhere has been no change to the carrying values. The recoverable amount of a CGU is determined based on value-in-usecalculations. These calculations use cash flow projections based on currentbusiness plans. The key assumptions for the value-in-use calculations arethose regarding revenue growth rates, discount rates and long-term growth rates. Management determined budgeted revenue growth based on past performance andits expectations for the market development. Discount rates were determinedusing post-tax rates that reflect current market assessments of the time valueof money and the risks specific to the CGUs. Cash flows beyond the five-yearperiod are extrapolated using estimated long term growth rates. The growth ratedoes not exceed the long-term average growth rate for the businesses in whichthe CGUs operate. 13. Intangible assets - OtherGroup 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 expected useful lives are as follows: Software 3 - 10 years Software development 5 - 10 years The investment in software development relates to development of products forresale in the Software Solutions division. The Software Development disposalreflects amounts relating to the Christie + Co operational support system, thecosts of which were recovered from the third party software house contracted toprovide the system. Group Software Software Total £'000 development £'000 £'000CostAt 1 January 2005 103 1,122 1,225Exchange adjustments (2) (14) (16)Additions 101 1,611 1,712At 31 December 2005 202 2,719 2,921Accumulated amortisationAt 1 January 2005 72 - 72Exchange adjustments (2) - (2)Charge for the year 41 - 41At 31 December 2005 111 - 111Net book amount at 31 December 2005 91 2,719 2,810 14. Property, plant and equipment Fixtures, fittings, computer equipment and Short leasehold property motor vehicles Total £'000 £'000 £'000 Group CostAt 1 January 2006 531 7,179 7,710Exchange adjustments (1) (41) (42)Additions - 1,407 1,407Disposals (158) (256) (414)At 31 December 2006 372 8,289 8,661Accumulated depreciationAt 1 January 2006 348 5,183 5,531Exchange adjustments (1) (27) (28)Charge for the year 64 1,185 1,249Disposals (155) (150) (305)At 31 December 2006 256 6,191 6,447Net book amount at 31 December 2006 116 2,098 2,214 Fixtures, fittings, computer equipment and Short leasehold property motor vehicles Total £'000 £'000 £'000 Group CostAt 1 January 2005 517 6,827 7,344Exchange adjustments - (22) (22)Additions 14 844 858Acquisitions - 32 32Disposals - (502) (502)At 31 December 2005 531 7,179 7,710Accumulated depreciationAt 1 January 2005 245 4,440 4,685Exchange adjustments - (15) (15)Charge for the year 96 1,155 1,251Reclassification 7 (7) -Disposals - (390) (390)At 31 December 2005 348 5,183 5,531Net book amount at 31 December 2005 183 1,996 2,179 Depreciation in the year on fixtures, fittings, computer equipment and motorvehicles includes £53,000 (2005: £126,000) on assets held under finance lease orhire purchase agreements which have a net book value at 31 December 2006 of£8,000 (2005: £62,000). At 31 December 2006 and 2005 the Company held fixtures, fittings, computerequipment and motor vehicles with a cost of £9,000 and accumulated depreciationof £9,000. 15. Deferred tax Deferred tax assets have been recognised in respect of tax losses and othertemporary differences giving rise to deferred tax assets where it is probablethat these assets will be recovered. The movements in deferred tax assets and liabilities (prior to the offsetting ofbalances within the same jurisdiction as permitted by IAS 12) during the yearare shown below. Deferred tax assets and liabilities are only offset wherethere is a legally enforceable right of offset and there is an intention tosettle the balances net. Group Company 2006 2005 2006 2005 £'000 £'000 £'000 £'000Deferred tax assets/(liabilities) comprises:Accelerated capital allowances 201 109 2 2Short-term timing differences 103 (152) (1) (13)Deferred tax asset/(liability) 304 (43) 1 (11)Deferred tax asset on pension 1,872 2,020 173 183At 31 December 2,176 1,977 174 172 Movements in the deferred tax asset: Group Company 2006 2005 2006 2005 £'000 £'000 £'000 £'000At 1 January 1,977 2,327 172 203Exchange adjustments 6 - - -Transfer from/(to) the income statement 193 (350) 2 (31)At 31 December 2,176 1,977 174 172 Deferred tax assets are recognised for tax losses carried forward to the extentthat the realisation of the related tax benefit through future taxable profitsis probable. The Group did not recognise deferred tax assets of £587,000 (2005:£307,000) in respect of losses that can be carried forward against futuretaxable income. The forthcoming reduction in the rate of UK corporation tax to 28% (previously30%) announced in the Budget on 21 March 2007 would reduce the deferred taxasset recognised at 31 December 2006 by approximately £145,000. 16. Investments in subsidiaries Shares in Loans to subsidiary subsidiary undertakings undertakings Total £'000 £'000 £'000 Company CostAt 1 January 2006 and at 31 December 2006 5,559 6,301 11,860ProvisionsAt 1 January 2006 and at 31 December 2006 610 - 610Net book amount at 31 December 2006 4,949 6,301 11,250Net book amount at 31 December 2005 4,949 6,301 11,250 Subsidiary undertakings At 31 December 2006 the principal subsidiaries were as follows:Company Country of Nature of business incorporationChristie, Owen & Davies plc (trading as Christie + UK Business valuers, surveyors and agentsCo)*Christie + Co SARL* France Business valuers, surveyors and agentsChristie + Co GmbH* Germany Business valuers, surveyors and agentsChristie, Owen & Davies SL* Spain Business valuers, surveyors and agentsPinders Professional & Consultancy Services Ltd UK Business appraisersRCC Business Mortgage Brokers plc (trading as UK Business mortgage brokersChristie Finance)RCC Insurance Brokers plc* (trading as Christie UK Insurance brokersInsurance)Orridge & Co Ltd UK Stocktaking and inventory management servicesOrridge SA* Belgium Stocktaking and inventory management servicesVenners plc UK Licensed stock and inventory auditors and valuersVcsTimeless Ltd* UK EPoS, head office systems and merchandise controlVenners Computer Systems Corporation* Canada EPoS, head office systems and merchandise controlTimeless SA* France EPoS, head office systems and merchandise controlTimeless Premier SL* Spain EPoS, head office systems and merchandise controlTimeless Italia Srl* Italy EPoS, head office systems and merchandise control The Company directly or indirectly* owns 100% of the ordinary share capital ofeach of the above companies. During the year the Group purchased the remaining10% of the Orridge SA ordinary share capital, making it a wholly ownedsubsidiary. 16a. Available-for-sale financial assets Group CompanyNon-current assets 2006 2005 2006 2005 £'000 £'000 £'000 £'000At 1 January 300 604 300 604Additions 53 200 - 200Disposals - (504) - (504)At 31 December 353 300 300 300ProvisionsCharge for the year 53 - - -At 31 December 53 - - -Net book amount at 31 December 300 300 300 300 During the year the Group purchased 1,522,500 1p ordinary shares in CapconHoldings plc, an AIM listed business. At 31 December 2006 the market value ofthe shares was £42,000. The investment has been provided against given therelative illiquidity of the shares. The other available-for-sale financial assets represent an unquoted investmentheld at cost. The fair value of the unquoted investment at 31 December 2006approximates to cost. 17. Inventories Group 2006 2005 £'000 £'000Finished goods and goods for resale 332 310 A provision of £17,000 (2005: £21,000) is held against goods for resale toreflect the net realisable value of the inventory. 18. Trade and other receivables Group CompanyCurrent assets 2006 2005 2006 2005 £'000 £'000 £'000 £'000Trade receivables 11,317 10,621 - -Less: Provision for impairment of receivables (2,387) (1,778) - -Amounts owed by group undertakings - - 1,868 6,333Other debtors 2,435 2,273 1,336 1,151Prepayments and accrued income 2,914 3,001 129 20 14,279 14,117 3,333 7,504 Group CompanyNon-current assets 2006 2005 2006 2005 £'000 £'000 £'000 £'000Amounts owed by group undertakings - - 8,458 -Less: Provision for impairment of amounts owed by group - - (2,400) -undertakings - - 6,058 - During the year the Company renegotiated the repayment terms of loans withcertain subsidiaries which has resulted in the loans being due after more thanone year. The fair values of trade and other receivables approximates to the cost asdetailed above. Concentrations of credit risk with respect to trade receivables are limited dueto the Group's customer base being large and diverse in addition certain Groupcompanies utilise credit insurance. Due to this, management believe there is nofurther credit risk provision required in excess of the normal provision fordoubtful receivables. 19. Share capitalOrdinary shares of 2p each Number 2006 Number 2005 £'000 £'000Authorised: 30,000,000 600 30,000,000 600 At 1 January and 31 DecemberAllotted and fully paid:At 1 January 25,003,552 500 24,747,496 495Issued during the year 212,832 4 256,056 5At 31 December 25,216,384 504 25,003,552 500 The consideration received for the shares issued in the year was £109,000 (2005:£114,000). The Company has one class of ordinary shares which carry no right to fixedincome. Investment in own shares The Group has established an Employee Share Ownership Plan (ESOP) trust topurchase shares in the market for distribution at a later date in accordancewith the terms of the Group's share option schemes. The rights to dividend onthe shares held have been waived. At 31 December 2006 the total payments by the Company to the ESOP to finance thepurchase of ordinary shares was £916,000 (2005: £641,000). The market value at31 December 2006 of the ordinary shares held in the ESOP was £1,601,000 (2005:£768,000). The investment in own shares represents 616,000 shares (2005:665,000) with a nominal value of 2p each. 19a. Share based payments Certain employees hold options to subscribe for shares in the Company at pricesranging from 36p to 145p under share option schemes for the period from August1998 to April 2006. The remaining options outstanding under approved schemes at 31 December areshown below: Number of Shares Option exercise price Date granted Option exercise period 2006 2005 - 27,000 35.70p Aug 1996 Aug 1999 - Aug 2006 - 65,833 48.00p Dec 1997 Dec 2000 - Dec 2007 6,000 6,000 47.50p Aug 1998 Aug 2001 - Aug 2008 7,667 40,667 41.50p Dec 1998 Dec 2001 - Dec 2008 15,000 15,000 81.00p Sep 1999 Sep 2002 - Sep 2009 22,000 34,333 145.00p May 2000 May 2003 - May 2010 6,000 21,000 81.50p Oct 2000 Oct 2003 - Oct 2010 37,000 43,333 53.50p Apr 2001 Apr 2004 - Apr 2011 6,000 9,000 40.00p Oct 2001 Oct 2004 - Oct 2011 9,000 26,333 36.00p Apr 2002 Apr 2005 - Apr 2012 25,000 25,000 45.50p Sep 2002 Sep 2005 - Sep 2012 43,000 81,000 47.50p Apr 2003 Apr 2006 - Apr 2013 31,000 57,000 46.50p Jun 2003 Jun 2006 - Jun 2013 93,000 103,000 94.00p May 2004 May 2007 - May 2014 38,000 41,000 111.50p Jun 2004 Jun 2007 - Jun 2014 37,000 52,000 98.50p Oct 2004 Oct 2007 - Oct 2014 168,000 175,000 100.00p Apr 2005 Apr 2008 - Apr 2015 35,000 44,000 101.50p Oct 2005 Oct 2008 - Oct 2015 188,000 - 130.50p Apr 2006 Apr 2009 - Apr 2016 766,667 866,499 Under the Share Option Scheme the Remuneration Committee can grant options overshares to employees of the Company. Options are granted with a fixed exerciseprice equal to the market price of the shares under option at the date of grant.The contractual life of an option is 10 years. Awards under the Share OptionScheme are generally reserved for employees at senior management level and 119employees are currently participating in this group. The Company has madegrants at least annually. Options granted under the Share Option Scheme willbecome exercisable on the third anniversary of the date of grant. Exercise ofan option is subject to continued employment and achievement of a performancetarget. The Group also operates a Save As You Earn (SAYE) scheme which was introduced in2002. Under the SAYE scheme eligible employees can save up to £250 per monthover a three or five year period and use the savings to exercise options grantedbetween 45.5p to 228.5p. There were 783,000 (2005: 814,000) remaining optionsoutstanding under the SAYE scheme at 31 December 2006. Share options (including SAYE schemes) were valued using the Black-Scholesoption-pricing model. No performance conditions were included in the fair valuecalculations. The key assumptions used in the calculations are as follows: 2006 2005Share price at grant date 46.50p - 222.00p 46.50p - 111.50pExercise price 46.50p - 228.50p 46.50p - 111.50pExpected volatility 36.3% - 52.7% 36.3% - 52.7%Expected life (years) 3 - 5 years 3 - 5 yearsRisk free rate 4.4% - 5.1% 4.4%Dividend yield 1.6% - 2.7% 2.7%Fair value per option 19.04p - 78.91p 19.04p - 45.63p The expected volatility is based on historical volatility over the last 8 years.The expected life is the average expected period to exercise. The risk freerate of return is the yield on zero-coupon UK government bonds of a termconsistent with the assumed option life. A reconciliation of share option movements (excluding SAYE schemes) over theyear to 31 December is shown below: 2006 2005 Weighted average Weighted average exercise price exercise price Number NumberOutstanding at 1 January 866,499 76.87p 977,555 63.37pGranted 191,000 130.50p 226,000 100.29pForfeited/lapsed (78,000) 83.00p (81,000) 81.36pExercised (212,832) 51.14p (256,056) 44.59pOutstanding at 31 December 766,667 96.75p 866,499 76.87pExercisable at 31 December 207,667 60.97p 313,499 59.86p The weighted average share price for options exercised over the year was 170.70p(2005: 102.16p). The total charge for the year relating to employee share basedpayment plans was £106,000 (2005: £65,000), all of which related toequity-settled share based payment transactions. The weighted average remainingcontractual life of share options outstanding at 31 December 2006 was 7.4 years(2005: 6.8 years). 20. Reserves Capital Fair value Share Merger Share based Own redemption and other Retained premium reserve payments shares reserve reserves earnings £'000 £'000 £'000 £'000 £'000 £'000 £'000 Group At 1 January 2006 3,935 945 103 (271) 10 4,722 4,802Share issues 105 - - - - 105 -Movement in respect of - - 106 (523) - (417) -employee share schemePurchase of minority interest - - - - - - (15) Retained profit for the year - - - - - - 3,214 At 31 December 2006 4,040 945 209 (794) 10 4,410 8,001 Capital Fair value Share Merger Share based Own redemption and other Retained premium reserve payments shares reserve reserves earnings £'000 £'000 £'000 £'000 £'000 £'000 £'000 Group At 1 January 2005 3,826 945 38 (335) 10 4,484 3,002Share issues 109 - - - - 109 -Movement in respect of - - 65 64 - 129 -employee share scheme Exchange difference on - - - - - - (158)repayment of foreign exchangeloan Retained profit for the year - - - - - - 1,958 At 31 December 2005 3,935 945 103 (271) 10 4,722 4,802 Capital Other Fair value Share Merger Share based Own redemption reserves and other Retained premium reserve payments shares reserve reserves earnings £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Company At 1 January 2006 3,935 945 - (271) 10 89 4,708 9,508Share issues 105 - - - - - 105 -Movement in respect of - - 1 (523) - - (522) -employee share schemeRetained profit for the - - - - - - - 1,358yearAt 31 December 2006 4,040 945 1 (794) 10 89 4,291 10,866 Fair value Capital and Share Merger redemption Other other Retained premium reserve Own shares reserve reserves reserves earnings £'000 £'000 £'000 £'000 £'000 £'000 £'000 Company At 1 January 2005 3,826 945 (335) 10 89 4,535 7,817Share issues 109 - - - - 109 -Movement in respect of - - 64 - - 64 -employee share schemeRetained profit for the - - - - - - 1,691yearAt 31 December 2005 3,935 945 (271) 10 89 4,708 9,508 Share premium - The balance on the share premium reserve represents the amountsreceived in excess of the nominal value of the ordinary shares. Merger reserve - The balance on the merger reserve represents the fair value ofthe consideration given in excess of the nominal value of the ordinary sharesissued in an acquisition made by the issue of shares. Share based payments - The balance on the share based payments reserverepresents the value of services provided in relation to employee shareownership schemes. Own shares - Own shares represents Company shares held in the Employee ShareOwnership Plan (ESOP) that can be used to meet the future requirements ofemployee Save As You Earn and share option schemes. Capital redemption reserve - The balance on the capital redemption reserverepresents the aggregate nominal value of all the ordinary shares repurchasedand cancelled. 21. Retirement benefit obligations The amounts recognised in the balance sheet are determined as follows: 2006 2005 £'000 £'000United Kingdom 6,240 6,732Overseas 60 58 6,300 6,790 United Kingdom The Group operates two defined benefit schemes, providing benefits on finalpensionable pay. The contributions are determined by qualified actuaries on thebasis of triennial valuations using the projected unit method. When a member retires, the pension and any spouse's pension is either secured byan annuity contract or paid from the managed fund. Assets of the schemes arereduced by the purchase price of any annuity purchase and the benefits no longerregarded as liabilities of the scheme. The amounts recognised in the balance sheet are determined as follows: 2006 2005 £'000 £'000 Present value of funded obligations 28,663 24,250Fair value of plan assets (25,679) (22,054) 2,984 2,196Present value of unfunded obligations 3,640 6,277Unrecognised actuarial losses (384) (1,741)Liability in the balance sheet 6,240 6,732 The principal actuarial assumptions used were as follows: 2006 2005 % %Discount rate 4.80 - 5.00 4.70 - 4.80Inflation rate 3.00 2.75Expected return on plan assets 6.20 - 6.90 6.00 - 6.25Future salary increases 3.00 - 3.25 2.75 - 3.10Future pension increases 3.00 3.00 - 3.60 Assumptions regarding future mortality experience are set based on advice frompublished statistics and experience. The average life expectancy in years of apensioner retiring at age 65 is as follows: 2006 2005 Years YearsMale 21.7 19.8Female 24.6 22.8 The movement in the defined benefit obligation is as follows: 2006 2005 £'000 £'000At 1 January 30,527 28,556Interest cost 1,477 1,515Current service cost 945 897Benefits paid (204) (493)Actuarial (gains)/losses (442) 52At 31 December 32,303 30,527Attributable to:Present value of funded obligations 28,663 24,250Present value of unfunded obligations 3,640 6,277 32,303 30,527 The movement in the fair value of plan assets is as follows: 2006 2005 £'000 £'000At 1 January 22,054 18,325Expected return on plan assets 1,364 1,269Contributions 1,550 1,504Benefits paid (204) (493)Actuarial gain 915 1,449At 31 December 25,679 22,054 The amounts recognised in the income statement are as follows: 2006 2005 £'000 £'000Current service cost (945) (897)Interest cost (1,477) (1,515)Expected return on plan assets 1,364 1,269Net actuarial loss recognised in the year - (26)Total included in employee benefit expenses (Note 6) (1,058) (1,169) The actual return on plan assets was £2,279,000 (2005: £2,718,000). Plan assets are comprised as follows: 2006 2005 Expected return % Expected return % £'000 £'000Equity 17,288 6.70 - 7.60 11,235 6.30 - 8.00Debt 3,618 4.80 - 5.10 5,827 4.60 - 4.80Other 4,773 5.30 - 5.70 4,992 4.00 - 6.30 25,679 6.20 - 6.90 22,054 6.00 - 6.25 The expected return on plan assets was determined by considering the expectedreturns available on the assets underlying the current investment policy.Expected yields on fixed interest investments are based on gross redemptionyields as at the balance sheet date. Expected returns on equity and propertyinvestments reflect long-term real rates of return experienced in the respectivemarkets Expected contributions to UK post retirement benefit schemes for the year ending31 December 2007 are £1,580,000. History of experience adjustments: 2006 2005 2004As at 31 December £'000 £'000 £'000Present value of defined obligations 32,303 30,527 28,556Fair value of plan assets (25,679) (22,054) (18,325)Deficit 6,624 8,473 10,231Experience adjustments on plan liabilities 364 183 (1,232)Experience adjustments on plan assets 915 1,449 52 The income statement charge of £82,000 (2005: £108,000) and balance sheetliability £578,000 (2005: £613,000) recognised by the Company in relation to theChristie Group defined benefit scheme has been allocated on the basis ofcontributions to the scheme. For the year ended 31 December 2006 contributionspaid by the Company amounted to £135,000 (2005: £155,000). Overseas In accordance with French law a retirement indemnity provision is held. Rightsto these benefits accrue on the condition that the employee will be with theemployer at retirement date. The movement in the liability recognised in the balance sheet is as follows: 2006 2005 £'000 £'000Beginning of the year 58 50Expenses included in employee benefit expenses 2 8End of the year 60 58 The principal assumptions used were as follows: 2006 2005 % %Discount rate 2.50 2.50Future salary increases 3.00 3.00Employee turnover 12.00 12.00 Assumptions regarding future mortality experience are set based on advice frompublished statistics and experience with mortality table INSEE statistic ref:TD-TV 00-02 being used. Expected contributions to the Overseas post retirement benefit scheme for theyear ending 31 December 2007 are £65,000. 22. Trade and other payables Group Company 2006 2005 2006 2005 £'000 £'000 £'000 £'000Trade payables 2,159 2,565 - -Amounts owed to group undertakings - - 9,085 4,304Other taxes and social security 4,248 3,332 897 856Other creditors 917 898 229 139Accruals 8,421 4,570 682 153Deferred income 1,209 1,383 - - 16,954 12,748 10,893 5,452 23. Borrowings Group Company 2006 2005 2006 2005Non-current £'000 £'000 £'000 £'000Bank and other borrowings (unsecured) 1,735 2,212 1,600 2,000Finance lease obligations - 9 - - 1,735 2,221 1,600 2,000 Group CompanyCurrent 2006 2005 2006 2005 £'000 £'000 £'000 £'000Bank and other borrowings (unsecured) 731 82 400 -Finance lease obligations 6 56 - - 737 138 400 - Total borrowings 2,472 2,359 2,000 2,000 The Group is not subject to any contractual repricing. The financial liabilities comprise: Group Company 2006 2005 2006 2005 £'000 £'000 £'000 £'000Floating interest rate loans 2,212 2,294 2,000 2,000Overdraft 45 - - -Invoice discounting 209 - - -Finance lease liabilities 6 65 - - 2,472 2,359 2,000 2,000 The maturity of non-current borrowings is as follows: Group Company 2006 2005 2006 2005 £'000 £'000 £'000 £'000Bank loans repayable between one and two years 460 477 400 400Bank loans repayable between two and five years 1,275 1,735 1,200 1,600Obligation under finance leases:-between one and two years - 9 - - 1,735 2,221 1,600 2,000 Interest on the Group's borrowings is as follows: - Floating interest rate loans - 1.25% to 1.37% above LIBOR; - Invoice discounting - 1.75% above base rate; and - Finance lease liabilities - variable. The carrying amounts of short-term and non-current borrowings approximate totheir fair value. 24. Notes to the cash flow statement a. Cash generated from/(used in) operations 2006 Group Company £'000 2005 2006 2005 £'000 £'000 £'000Profit for the year 4,133 2,687 2,275 2,416Adjustments for: - Taxation 2,019 1,694 (535) (49) - Finance (credit)/costs (73) 28 (5,608) (2,953) - Depreciation 1,249 1,251 - - - Amortisation of intangible assets 49 41 - - - Profit on sale of property, plant and equipment (47) (20) - - - Profit on sale of current available-for-sale financial - (176) - (176) assets - Loss on sale of intangible assets 19 - - - - Foreign currency translation (105) (19) - - - Movement in share option charge 106 65 1 - - Movement in retirement benefit obligation (490) (327) (35) (47) - Increase in non-current other receivables - - (6,058) -Changes in working capital (excluding the effects ofacquisition and exchange differences on consolidation): - (Increase)/decrease in inventories (22) 45 - - - (Increase)/decrease in trade and other receivables (318) (515) 4,170 (2,086) - Decrease in current available-for-sale financial - 504 504 assets - - Increase in trade and other payables 4,058 1,514 5,208 1,259Cash generated from/(used in) operations 10,578 6,772 (582) (1,132) b. Acquisition of subsidiary On 18 January 2005 the Group purchased West London Estates Limited. The cashoutflow as a result of the acquisition is detailed below: 2005 £'000Property, plant and equipment 32Net current assets 270Assets acquired 302Goodwill on acquisition 21Consideration paid 323Cash acquired (244)Net cash outflow (79) 25. Reconciliation of movement in net funds As at As at 1 January Cash flow Non-cash movements 31 December 2006 2006 £'000 £'000 £'000 £'000 Cash in hand and at bank 6,811 4,603 - 11,414Overdraft - (45) - (45)Invoice discounting - (209) - (209)Debt due after one year (2,212) - 477 (1,735)Debt due within one year (82) 82 (477) (477)Finance leases due after one year (9) 9 - -Finance leases due within one year (56) 50 - (6) 4,452 4,490 - 8,942 26. Commitments a. Operating lease commitments At 31 December 2006 the group has lease agreements in respect of properties,vehicles, plant and equipment, for which the payments extend over a number ofyears. 2005 Property 2006 Vehicles Property Vehicles and and equipment equipment £'000 £'000 £'000 £'000 Commitments under non-cancellable operating leases due:Within one year 1,567 805 1,379 552Within two to five years 4,655 932 3,914 1,431After five years 2,225 - 3,579 - 8,447 1,737 8,872 1,983 Operating lease payments represent: - rentals payable by the Group for certain of its office properties.The leases have varying terms, break clauses and renewal rights. - rentals for vehicles and equipment under non-cancellable operatinglease agreements. The Group also sub-lets an element of office space in respect of certainproperty lease agreements. b. Capital commitmentsThe Group has contracted but not provided for capital commitments for £255,000(2005: £298,000) of capital expenditure. 27. Contingent liabilitiesIn the ordinary course of business, claims arise in Group companies. In theopinion of the Directors, appropriate amounts have been set aside in respect ofliabilities which individual companies within the Group may suffer as a resultof the resolution of these claims. FIVE YEAR RECORD The Group adopted IFRS for the first time in 2005 and in accordance with therequirements of IFRS, 2004 figures were restated. Restatement of earlier yearsis not required under IFRS and accordingly the information presented below for2003 and 2002 in respect of the income statement is prepared under UK GAAP. Themain adjustments that would be required to comply with IFRS (for 2003 and 2002)are the recognition of the defined benefit pension funds liabilities on thebalance sheet in accordance with IAS 19 and the reversal of goodwillamortisation (IFRS 3). Consolidated income statements IFRS IFRS IFRS UK GAAP UK GAAP 2006 2005 2004 2003 2002 £'000 £'000 £'000 £'000 £'000Revenue 87,096 77,506 69,968 62,457 46,473 Operating profit before goodwill amortisation 6,079 4,409 3,844 3,245 2,614Goodwill amortisation - - - (551) (497)Exceptional item - - 2,455 - -Finance credit/(costs) 73 (28) (176) (206) (164)Profit on ordinary activities before tax 6,152 4,381 6,123 2,488 1,953Taxation (2,019) (1,694) (360) (1,469) (1,182)Profit on ordinary activities after tax 4,133 2,687 5,763 1,019 771Minority interest (2) (3) (10) - -Dividends paid (917) (726) (722) (722) (625)Retained profit for the year 3,214 1,958 5,031 297 146 Earnings per share- basic 16.90p 10.79p 23.28p 4.15p 3.06p- basic before exceptional items (net of tax)* 16.90p 10.79p 9.23p 4.15p 3.06p- basic before goodwill amortisation and exceptional 16.90p 10.79p 9.23p 6.39p 5.03pitems (net of tax)*Dividends per ordinary share (payable in respect of 4.0p 3.5p 3.0p 3.0p 2.5pthe year) *Exceptional items include credit for the prior year dual residence tax losses and the exceptional finance credit of£2,455,000 in 2004. Consolidated balance sheets 2006 2005 £'000 2004 £'000 £'000Non-current assets 11,952 11,205 10,157Current assets 26,307 21,238 18,142Current liabilities (17,691) (13,618) (11,424) 20,568 18,825 16,875Non-current borrowings (1,735) (2,221) (2,108)Retirement benefit obligations (6,300) (6,790) (7,117)Net assets 12,533 9,814 7,650 Shareholders' funds - equity interests 12,533 9,795 7,634Minority interest - 19 16 12,533 9,814 7,650 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 2006, 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 29 June 2007 at 39 Victoria Street,London, SW1H 0EU. Dividends, the ex-dividend date is 6 June 2007, the record date 8 June 2007 andthe date payable is 5 July 2007. Group companies Professional business services Business sales and valuations, consultancy, financial services Christie + Co The leading specialist firm providing business intelligence in the hospitality,leisure, retail and care sectors. International operations are based inBarcelona, Berlin, Dusseldorf, Frankfurt, London, Madrid, Marseilles, Munich andParis. Its 16 offices across the UK are focused on agency, valuation services,investment and consultancy activity in its key sectors - hotels, public houses,restaurants, leisure, care and retail. www.christie.com and www.christiecorporate.com Christie Finance and Christie Insurance The market leaders in finance and insurance for the leisure, retail and caresectors. Services include finance for business purchase or re-financing in boththe private and corporate sectors arranged in conjunction with major financialinstitutions, and the provision of tailored insurance schemes. www.christiefinance.com and www.christieinsurance.com Pinders The UK's leading specialist business appraisal, valuation and consultancycompany, principally providing professional services to the licensed leisure,retail and care sectors, and increasingly within the commercial and corporatebusiness sectors, especially in relation to professional practices and servicebusinesses. Its expanding Building Consultancy Division that offers a full rangeof project management, building monitoring and building surveying services.Instructions are undertaken for a broad cross section of corporate, charity,private and public sector clients. www.pinders.co.uk and www.pinderpack.com Software solutions EPoS and head office systems VCSTIMELESS Retail The VCSTIMELESS retail applications address such sectors as fashion,accessories, luggage, leather goods, sports, footwear, home furnishings,perfumery and toys. Solutions include merchandising planning and management,forecasting, supply chain optimisation, EPoS, CRM and business intelligenceapplications. The Colombus Enterprise suite is a comprehensive retail managementsoftware suite, proven to meet the specific needs of single and multi-channelretailers. Colombus.next is a next generation supply chain optimisation anddecision support solution. Leisure and cinemas VCSTIMELESS' VENPoS and Vista-branded leisure, hospitality and cinema managementsoftwares comprise admissions, head office, back office and online ticketingmodules. www.vcstimeless.com This information is provided by RNS The company news service from the London Stock Exchange
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Share Price:
97.50
Bid:
95.00
Ask:
100.00
Change:
2.50 (2.63%)
Spread:
5.00 (5.263%)
Open:
95.00
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97.50
Low:
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