CTP.L Regulatory News (CTP)

4 Dec 2007 07:01

Redstone PLC04 December 2007 REDSTONE PLC ("Redstone", "Company" or "the Group") Unaudited Interim Results for the six months ended 30 September 2007 Redstone (AIM:RED.L), a leading provider of Integrated IT and CommunicationsSolutions in the UK and Ireland, today announces its financial results for thesix months ended 30 September 2007. FINANCIAL HIGHLIGHTS • Revenues up by 104% to £96.6m (H1 FY07: £47.4m) • Gross Profit up by 112% to £37.1m (H1 FY07: £17.5m ) • Gross Margin increased to 38.4% (H1 FY07: 36.8%) • Adjusted EBITDA* increased by 131% to £6.5m (H1 FY07*: £2.8m) • PBT** increased to £4.8m ( H1 FY07: £2.1m), unadjusted PBT £0.2m (H1 FY07: £0.8m) • Underlying organic revenue growth of over 10%*** • Net cash generated from operating activities up by 47% to £2.7m (H1 FY07 £1.8m) • Cash position strong at over £10m; Net debt £20.7m (H1 FY07 £3.2m) *Before interest, tax, depreciation, amortisation, restructuring costs and sharebased payment charges. Prior year adjusted EBITDA has been restated to includethe holiday accrual charge. ** Before amortisation of intangibles, restructuring costs and share basedpayment charges. ***Growth of existing operations on a comparable basis after excludingdiscontinued revenue streams relating to the closure of the Symphony BV office,the withdrawal of Orange from the consumer business model and the decision tocease making 3-Mobile Network sales. OPERATIONAL HIGHLIGHTS • Successfully completed integration of Comunica and IDN, both acquired at the end of FY07. • Redstone now strongly positioned to tender for, win and deliver larger contracts, evidenced by several major contract wins secured during, and just after the end of the period, including; O White City retail centre project worth £13m, O Bristol and Leicester shopping centre projects worth £3.4m, O University College Dublin storage system project worth up to £3.2m* over 5 years, O and a regional support services contract with JP Morgan worth up to £13.4m over the next 5 years. • Short-listed to provide ICT for Birmingham BSF contract for 89 schools. • Order book and future visibility increasing. * Translated at a rate of Euro 1.4 to £1 Martin Balaam, Chief Executive Officer, Redstone, commented, "Over the last two years Redstone has transformed itself from a niche SMEfocused telecoms company into a leading provider of Integrated IT andCommunications Solutions in the UK and Ireland at the SME and corporate levels.With a healthy pipeline of new contracts, a high proportion of recurring revenueand key partnerships in place, we believe the outlook for the Group is extremelypositive. The Board is confident that Redstone will continue to deliver organicgrowth in the future, whilst remaining committed to its strategy of furtheracquisitions during the current climate of convergence and consolidation amongstsector players." ENQUIRIES: Redstone plc Tel. +44 (0)845 200 2200Martin Balaam, Chief Executive OfficerTim Perks, Chief Financial Officer ICIS Limited Tel. +44 (0)20 7651 8688Tom MoriartyBob Huxford Investec Bank (UK) Limited Tel. +44 (0)20 7597 5000James SandfordBen Poynter Contents Chief Executive's Statement 1Consolidated Income Statement 4Consolidated Statement of Changes in Equity 5Consolidated Balance Sheet 6Consolidated Cash Flow Statement 7Notes to the half-yearly financial information 8Statement of Directors' Responsibilities 16Auditors review report 17Advisers 18 Chief Executive's Statement I am very pleased to report that Redstone has continued to deliver substantialgrowth, both organically and through acquisition, for the six months ended 30September 2007. Underlying organic revenue growth from continuing operations wasover 10% for the period*. The acquisitions completed at the end of FY07 ofComunica and IDN have been integrated during the period. They have broughtsignificant operational efficiencies, whilst substantially increasing the scaleand capacity of Redstone. This additional delivery capability has alreadyenabled the Company to win substantial contracts, such as the £13m White Cityretail centre contract, and the support contract with JP Morgan, worth up to£13.4m over the next 5 years. * Growth of existing operations on a comparable basis after excludingdiscontinued revenue streams relating to the closure of the Symphony BV office,the withdrawal of Orange from the consumer business model and the decision tocease making 3-Mobile Network sales. Financial Highlights Revenues have increased by 104% to £96.6m from £47.4m in H1 FY07. Gross Profithas increased by 112% to £37.1m (H107: £17.5m), and the gross profit margin hasalso increased to 38.4% (H107: 36.8%). Following a strong period of trading andcontinued cost control EBITDA has increased to £6.5m* compared with £2.8m* forthe corresponding period last year, an increase of 131%. Normalised PBT was£4.8m for the period compared with £2.2m in the corresponding period last year.The reported PBT was £0.2m (H107:£0.8m) for the period after charging £3m (H107:£1m) for amortisation of intangibles, and a further charge of £1.6m (H107:£0.3m)relating to restructuring and share based payments charges. As a result of theincreased debt facility used to finance acquisitions, finance charges for theperiod have increased from £0.4m to £1.1m. The Company has utilised tax lossesduring the period, recognised deferred tax assets and released deferred taxliabilities which has resulted in a tax credit of £1m. Adjusted basic EBITDA*earnings per share has increased from 3.15p per share to 4.52p per share, andbasic earnings per share has decreased from 1.12p per share to 0.83p per share. Redstone has available tax losses of over £70m, and expects to be able tominimise its tax charge and tax payable for the foreseeable future. Cash generated from operating activities was £2.7m (H107: £1.8m), underpinning astrong balance sheet with cash of over £10.8m (H107: £8.0m) and net debt of£20.7m (H107: £3.2m). * Before interest, tax, depreciation, amortisation, restructuring costs andshare based payment charges. Prior year adjusted EBITDA has been restated toinclude the holiday accrual charge. Operational Highlights Strategic acquisitions Redstone successfully completed the acquisitions of IDN Telecom plc and ComunicaHoldings Limited shortly before the end of FY07. During H1 FY08 these businesseshave been integrated into Redstone; both performed well throughout the period. These acquisitions consolidate Redstone's position as a leading provider ofIntegrated IT and Communications Solutions and represent key milestones in theCompany's growth strategy. Specifically, the acquisitions have yielded thefollowing benefits: Comunica: • Addition of scale, capacity and specialist network infrastructure solution capability to the ICT business; • Procurement of a blue-chip client list across several key business verticals; • Removal of a significant competitor from the converged solutions market. IDN: • Addition of over 2,000 corporate and SME customers; • Increased critical mass within the fixed line telecoms and mobile divisions; • Significant cost savings through business synergies and operational efficiencies. Redstone will continue to seek acquisition opportunities that increase both thescale, capability and capacity of the Company such that it can meet theconsiderable market demand currently being witnessed for large scale ICTprojects. Business Development During the first half of this year Redstone has announced a number ofsignificant contract wins. This is due to the strategic acquisitions made in thelast two years adding scale and capacity and the focus given by management inintegrating and enhancing their capability within the Group. Redstone now hasboth a strong track record in delivering major infrastructure contracts and thecapacity to deliver projects of greater scale and complexity in the future. Thisis an essential step towards building a reputation for credibility andreliability that should enable Redstone to successfully bid for contracts of asimilar and greater size in the future. Some of the key contracts signed during the six month period include: • The provision of converged IT and communications infrastructure to Highcross Quarter in Leicester, and Bristol's Cabot Circus. These are retail, residential and leisure complex developments and the contracts have an initial value of £1.6m and £1.8m respectively for a total initial value of £3.4m. • The delivery of the initial stage of a five year project to supply University College Dublin with a complete Hewlett Packard storage system. The project is valued at up to £3.2m* over the next 5 years. Key contracts signed following the six month period include: • The provision of an IP solution for the Westfield shopping centredevelopment in White City, which will be the largest in-town retail centre inEurope. The contract is worth £13m and will significantly enhance Redstone'sreferenceability and positioning when bidding on similar projects in the future. • The provision of regional support services to JP Morgan worth up to£13.4m over the next 5 years. This contract demonstrates that Redstone'sincreased capacity is enabling the Company to secure and deliver contracts of agreater scale. • The delivery of a Hewlett Packard storage system for Meteor MobileCommunications in Ireland. Worth £0.9m*, the contract cements Redstone'sposition as the leading provider of HP related technologies in Ireland and givesthe Group confidence that it will be able to increase scale to offer similarservices to the UK. * Translated at a rate of Euro 1.4 to £1 Given the above successes, the Board is confident of the company continuing itsability to secure and deliver contracts of an increasing size and scale. This isevidenced by Redstone being short-listed for the Building Schools for the Future(BSF) programme in Birmingham, involving the complete rebuild or remodel of 89Birmingham schools. The estimated capital value of the entire project(including ICT) is £820m. If successful Redstone would be supplying a completeICT solution that will supply each school with a fully integrated IP network,communications, IT and e-learning environment. Furthermore, of the companiesshort-listed for this contract for the provision of the ICT solution, Redstoneachieved the highest scoring during the bidding process. Cross-Selling Opportunities The expanded client list has produced a number of cross-selling opportunitieswhich the Group has identified and is increasingly exploiting. Specificcustomers are being targeted and cross-sales account for an increasingproportion of sales and gross margin. An example of additional cross-sellingrevenues made during the six months was the call centre solution delivered toTelecom Service Centres (TSC), initially a Redstone Telecom customer, for avalue of £0.5m. Strategic Partnerships Redstone has developed high quality relationships with a number of partnersthroughout its target verticals which have proved key in terms of winning largecontracts within the ICT arena. These partnerships include Hammerson plc,enabling Redstone to bid for OneNET intelligent buildings network infrastructurecontracts; Catalyst Lend Lease for the BSF contracts; and Hammerson andWestfield for the shopping centre contracts. The Group is confident that thesepartnerships will continue to develop and prove increasingly productive. Business growth strategy and market positioning Increased awareness among the UK's public and corporate sectors of theoperational cost savings and efficiencies inherent in migrating to IP-enabledconverged communication systems is driving strong demand in Redstone's coremarket. Furthermore, market trends indicate a preference among organisations towork with a single, combined IT and communications supplier. Given Redstone'score capabilities of designing, implementing and maintaining complex, IPenabled, integrated ICT solutions, the Company is uniquely positioned to benefitfrom the current demand from its customers to make the transition to unified ITand communication systems. Redstone will also look to segment its customer base so as to service betterit's SME customers and intends to create a single point of contact for SME'sgiving them access to the full suite of Redstone's IT and Communication productand services. The Company remains committed to its strategy of growth, both organically andthrough acquisition. This will involve the targeting of new partnerships in keybusiness verticals and new contract opportunities of increasing size. As theCompany's track record in delivering these larger-scale contracts progresses, somomentum is expected to build and the size and number of contracts availablewill increase. In order to meet these demands, Redstone's objective will be tocontinue to build scale and capacity through acquisition. Outlook Over the last two years Redstone has transformed itself from a niche SME focusedtelecoms company into a leading provider of Integrated IT and Communicationssolutions in the UK and Ireland at the SME and corporate levels. With a healthypipeline of new contracts, a high proportion of recurring revenue, and keypartnerships in place, the directors believe the outlook for the Group isextremely positive. The Board is confident that Redstone will continue todeliver organic growth in the future, whilst remaining committed to its strategyof further acquisitions during the current climate of convergence andconsolidation amongst sector players. Martin Balaam Chief Executive 3 December 2007 Consolidated Income Statement Unaudited Six Unaudited Six Audited Year months months ended 31 ended 30 ended 30 March September 2007 September 2006 2007 Note £000 £000 £000 Revenue 2 96,584 47,447 112,955 Cost of sales (59,473) (29,980) (71,932) Gross profit 37,111 17,467 41,023 Other operating income 77 239 154Selling and distribution costs (7,507) (4,678) (9,993)Administrative expenses (27,683) (11,938) (28,833)Restructuring costs 3 (945) - (2,792) Adjusted EBITDA* 6,546 2,831 7,719 Depreciation (893) (514) (1,241)Amortisation of intangibles (3,020) (952) (2,804)Restructuring costs (945) - (2,792)Stock compensation (635) (275) (1,323) Operating profit/(loss) 1,053 1,090 (441) Finance income 251 129 199Finance costs (1,131) (371) (802) Profit/(loss) on ordinary activities before taxation 173 848 (1,044) Tax on profit/(loss) on ordinary activities 1,033 154 1,173 Profit for the period (attributable to equity holders of 1,206 1,002 129the parent Company) Earnings per share Basic and diluted earnings per share 4 0.83 p 1.12 p 0.12 pBasic adjusted EBITDA* per share 4.52 p 3.15 p 7.42 pDiluted adjusted EBITDA* per share 4.51 p 3.15 p 7.42 p *earnings before interest, tax, depreciation, amortisation, restructuring costsand share based payment. Prior year adjusted EBITDA has been restated toinclude the holiday accrual charge The notes on pages 8 to 15 form an integral part of this condensed consolidatedhalf-yearly financial information. Consolidated Statement of Changes in Equity Other reserves Called up Share Merger Capital Translation Retained Total share premium reserve Redemption reserve earnings equity capital account reserve £000 £000 £000 £000 £000 £000 £000 At 1 April 2006 13,022 208,100 216 - 54 (192,372) 29,020Profit for the period - - - - - 1,002 1,002Share-based payments - - - - - 301 301Currency translation - - - - (155) - (155)differencesShares issued 4,064 17,307 - - - - 21,371Costs associated with - (360) - - - - (360)share issueAt 30 September 2006 17,086 225,047 216 - (101) (191,069) 51,179Loss for the period - - - - - (873) (873)Share-based payments - - - - - 171 171Currency translation - - - - 201 - 201differencesProceeds from shares 2,416 14,234 - - - - 16,650issuedConsideration shares 650 3,648 - - - - 4,298Deferred share (b) (5,683) - - 5,683 - - -eliminationShare premium (d) - (225,047) - - - 225,047 -cancellationCosts associated with - (370) - - - - (370)share issueAt 1 April 2007 5,683 100 33,276 71,256 14,469 17,512 216Profit for the period - - - - - 1,206 1,206Share-based payments - - - - - 476 476Currency translation - - - - 14 - 14differencesShares issued 61 390 - - - - 451At 30 September 2007 14,530 17,902 216 5,683 114 34,958 73,403 (a) Merger reserve The merger reserve resulted from the acquisition of Redstone CommunicationsLimited (formerly Redstone Network Services Limited) and represents thedifference between the value of the shares acquired (nominal value plus relatedshare premium) and the nominal value of the shares issued. (b) Capital redemption reserve The capital redemption reserve arose on the elimination of deferred shares andrepresents the nominal value of the deferred shares. (c) Translation reserve The translation reserve is used to record exchange differences arising from thetranslation of the financial statements of foreign subsidiaries. (d) Share Premium cancellation During the year ended 31 March 2007 the Board obtained approval to redistributeshare capital reserves in order to reposition the Group and enable it to issue adividend if the Directors decided this was in the best interests of the Group.Share Premium of £225,047,000 was eliminated against brought forward losses. The notes on pages 8 to 15 form an integral part of this condensed consolidatedhalf-yearly financial information. Consolidated Balance Sheet Unaudited 30 Unaudited 30 Audited 31 September September March 2007 2006 2007 Note £000 £000 £000 AssetsNon-current assetsIntangible assets 5 95,545 63,649 97,522Investments 202 - -Property, plant and equipment 4,273 2,645 4,083Deferred tax asset 3,616 2,092 3,401Other non-current assets 34 639 55 103,670 69,025 105,061 Current assetsInventories 1,310 862 1,093Trade and other receivables 39,583 20,661 35,499Income tax receivable 10 - 123Cash and cash equivalents 10,850 7,979 10,421 51,753 29,502 47,136 Total assets 155,423 98,527 152,197 Equity and liabilitiesEquityCalled up share capital 14,530 17,086 14,469Share premium account 17,902 225,047 17,512Other reserves 6,013 115 5,999Retained earnings 34,958 (191,069) 33,276 73,403 51,179 71,256 Current liabilitiesTrade and other payables 39,776 28,518 38,164Deferred consideration - - 2,849Income tax payable - 293 -Borrowings 6,900 - 4,943Provisions 1,862 1,711 868 48,538 30,522 46,824 Non-current liabilitiesTrade and other payables 1,272 182 1,066Provisions 216 1,139 1,417Borrowings 24,657 11,194 23,444Deferred tax liability 7,337 4,311 8,190 33,482 16,826 34,117 Total equity and liabilities 155,423 98,527 152,197 The notes on pages 8 to 15 form an integral part of this condensed consolidatedhalf-yearly financial information. Consolidated Cash Flow Statement Unaudited Six months Unaudited Six months Audited ended 30 ended 30 Year ended 31 September 2007 September 2006 March 2007 Note £000 £000 £000 Cash flows from operating activitiesCash generated from operations 6 2,635 1,844 (274)Income tax paid 78 (4) (133)Net cash flows from/(used in) operating 2,713 1,840 (407)activities Cash flows from investing activitiesProceeds from sale of property, plant and - - 53equipmentPurchase of property, plant and equipment (1,016) (342) (1,466)Purchase of intangible assets (194) (25) (176)Acquisition of subsidiaries, net of cash acquired (3,900) (19,879) (44,253)Net cash flows used in investing activities (5,110) (20,246) (45,842) Cash flows from financing activitiesProceeds from issue of shares 451 20,021 38,021Transaction costs of issuing shares - (360) (730)Proceeds from borrowings 4,200 5,000 22,150Repayment of borrowings (1,045) (3,416) (7,666)Interest received 258 125 199Interest paid (1,047) (287) (802)Net cash flows from financing activities 2,817 21,083 51,172 Net increase in cash and cash equivalents 420 2,677 4,923Effects of currency translation on cash and cash 9 (25) 171equivalentsCash and cash equivalents at 1 April 10,421 5,327 5,327Cash and cash equivalents at 30 September/31 March 10,850 7,979 10,421 The notes on pages 8 to 15 form an integral part of this condensed consolidatedhalf-yearly financial information. Notes to the half-yearly financial information 1 Basis of preparation The interim financial information is unaudited but has been reviewed by theauditors, PricewaterhouseCoopers, and their report to Redstone plc is set out onpage 17. This consolidated half-yearly financial information for the half-year ended 30September 2007 has been prepared in accordance with IAS 34, 'Interim financialreporting' as adopted by the European Union. The half-yearly consolidatedfinancial report should be read in conjunction with the annual financialstatements for the year ended 31 March 2007, which have been prepared inaccordance with IFRSs as adopted by the European Union. The financial information contained in the interim report does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985.Statutory accounts for the year ended 31 March 2007 have been filed with theRegistrar of Companies. The auditors' report on those accounts was unqualifiedand did not contain a statement made under Section 237(2) or Section 237(3) ofthe Companies Act 1985. The interim report was approved by the Board on 4 December 2007. Accounting policies The accounting policies adopted are consistent with those of the annualfinancial statements for the year ended 31 March 2007, as described in thoseannual financial statements with the exception of: Long term contract accounting Revenue from fixed price construction contracts is recognised on a percentage ofcompletion method to the extent that the level of completion for a contract canbe measured. Revenue includes expenses to the extent they are recoverable.Where the percentage of completion cannot be reliably measured, revenue isrecognised when specific contractual milestones are met or on projectcompletion. This adjustment decreased opening stock on the balance sheet by£348k, there was no effect on the income statement in prior periods. Maintenance spares Stocks of maintenance spares are recorded at cost and written off over threeyears or the period of the contract to which they relate, if that is a shorterperiod. Maintenance spares stocks are expensed once they are consumed. Theeffect of this change in accounting policy has been to capitalise £112k ofmaintenance stock at 30 September 2007. The following new standards, amendments to standards or interpretations aremandatory for the first time for the financial year ending 31 March 2008. • IFRS 7, 'Financial instruments: Disclosures'', effective for annualperiods on or after 1 January 2006. As this interim report contains onlycondensed financial statements, there is no impact in the period to 30 September2007. This will be reassessed at year end 31 March 2008. • IFRIC 8, 'Scope of IFRS 2', effective for annual periods beginning onor after 1 May 2006. Redstone plc already charges to the income statement fairvalue in accordance to IFRS 2 share-based payments. • IFRIC 9, 'Reassessment of embedded derivatives', effective for annualperiods beginning on or after 1 May 2006. This interpretation has not had asignificant impact on the reassessment of embedded derivatives as the Groupalready assessed if embedded derivatives should be separately disclosed usingconsistent principles with IFRIC 9. • IFRIC 10, 'Interim financial reporting and impairment', effective forannual periods beginning on or after 1 November 2006. There is no impairmentcharge in the interim period 30 September 2007 and therefore no impact on thefinancial statements. • IFRIC 11, 'IFRS 2 - Group and treasury share transactions', effectivefor annual periods beginning on or after 1 March 2007. Management do not expectthis interpretation to be relevant for the Group. The following new standards, amendments to standards and interpretations havebeen issued, but are not effective for the financial year ending 31 March 2008and have not been early adopted: • IFRIC 12, 'Service concession arrangements', effective for annualperiods beginning on or after 1 January 2008. Management do not expect thisinterpretation to impact the financial statements. • IFRIC 14, 'IAS 19, The limit on a defined benefit asset', minimumfunding requirements and their interaction, effective for annual periodsbeginning on or after 1 January 2008. Management do not expect thisinterpretation to impact the financial statements. • IAS 23 (2007), 'Borrowing costs', effective for annual periodsbeginning on or after 1 January 2009. Management do not expect thisinterpretation to impact the financial statements. • IFRS 8, 'Operating segments', effective for annual periods beginningon or after 1 January 2009. Management do not expect this interpretation toimpact the financial statements. 2 Segment reporting Primary reporting format - Business Segments (a) Unaudited for the six months ended 30 September 2007 Telecom Mobile Converged Managed Technology Central Total Solutions Solutions £000 £000 £000 £000 £000 £000 £000 Revenue 24,448 17,772 43,082 5,989 5,293 - 96,584 Adjusted operating costs* (21,992) (16,648) (39,583) (5,708) (4,980) (1,127) (90,038)Adjusted EBITDA* 2,456 1,124 3,499 281 313 (1,127) 6,546Depreciation (122) (22) (313) (166) (73) (197) (893)Equity-settled share-based (52) (18) (155) (58) (54) (141) (478)payments Cash-settled share- - - - - - (157) (157)based paymentsAmortisation of intangible (736) (337) (1,753) (98) (31) (65) (3,020)assetsRestructuring costs (266) (85) (83) - 10 (521) (945)Segment result 1,280 662 1,195 (41) 165 (2,208) 1,053Net finance costs (880)Tax 1,033 Profit for the year 1,206 Assets and liabilitiesSegment assets 47,402 12,172 66,749 12,218 11,059 5,823 155,423 Segment liabilities 17,489 4,266 22,917 4,719 2,002 30,627 82,020 Other segment informationCapital expenditureProperty, plant and 6 13 224 239 161 373 1,016equipmentIntangibles - software - - 53 - - 141 194Depreciation 122 22 313 166 73 197 893Amortisation 736 337 1,753 98 31 65 3,020 * before interest, tax, depreciation, amortisation, restructuring costs andshare based payment charges. 2 Segment reporting (b) Unaudited for the six months ended 30 September 2006 Mobile Converged Managed Telecom Solutions Solutions Technology Central Total £000 £000 £000 £000 £000 £000 £000 Revenue 16,743 8,197 13,822 4,283 4,402 - 47,447 Adjusted operating costs* (14,368) (8,035) (13,406) (3,725) (3,965) (1,117) (44,616)Adjusted EBITDA* 2,375 162 416 558 437 (1,117) 2,831Depreciation (78) (10) (75) (238) (15) (98) (514)Equity-settled share (16) - (98) (13) (15) (159) (301)based paymentsCash-settled share-based - - - - - 26 26paymentsAmortisation of (239) (85) (537) (14) (31) (46) (952)intangible assetsSegment result 2,042 67 (294) 293 376 (1,394) 1,090 Net finance cost (242)Tax 154Profit for the period 1,002 Assets and liabilitiesSegment assets 29,580 14,703 25,117 10,670 10,392 8,065 98,527 Segment liabilities 7,699 4,342 9,044 4,060 1,620 20,583 47,348 Other segmentinformationCapital expenditureProperty, plant and 52 4 61 79 37 109 342equipmentProperty, plant and 147 87 - 133 - - 367equipment - businesscombinationIntangible asset - - - - - - 25 25softwareIntangible assets 16,103 11,343 - 4,302 - - 31,748acquired - businesscombination Depreciation 78 10 75 238 15 98 514Amortisation 239 85 537 14 31 46 952 *before interest, tax, depreciation, amortisation, restructuring costs and sharebased payment charges. Prior year adjusted EBITDA has been restated to includethe holiday accrual charge. 2 Segment reporting (c) Audited for the year ended 31 March 2007 Telecom Mobile Converged Managed Technology Central Total Solutions Solutions £000 £000 £000 £000 £000 £000 £000 Revenue 36,715 25,995 29,763 10,713 9,769 - 112,955 Adjusted operating costs* (31,676) (24,703) (28,726) (9,204) (9,127) (1,800) (105,236)Adjusted EBITDA* 5,039 1,292 1,037 1,509 642 (1,800) 7,719Depreciation (214) (29) (280) (322) (55) (341) (1,241)Equity-settled share-based (51) (2) (17) (39) (40) (323) (472)paymentsCash-settled share- - - - - - (851) (851) based paymentsAmortisation of intangible (831) (450) (1,232) (130) (63) (98) (2,804)assetsRestructuring costs (1,215) (341) (1,090) (25) (28) (93) (2,792)Segment result 2,728 470 (1,582) 993 456 (3,506) (441)Net finance costs (603)Tax 1,173 Profit for the year 129 Assets and liabilitiesSegment assets 46,440 11,821 66,786 11,886 11,904 3,360 152,197 Segment liabilities 14,963 4,372 26,595 4,067 2,088 28,856 80,941 Other segment informationCapital expenditureProperty, plant and 87 31 247 323 288 490 1,466equipmentProperty, plant and 255 68 1,006 134 - - 1,463equipment acquired -business combinationIntangibles - software - - 33 - - 143 176Intangible assets acquired 8,248 2,937 10,304 586 - - 22,075- business combinationsDepreciation 214 29 280 322 55 341 1,241Amortisation 831 450 1,232 130 63 98 2,804 *before interest, tax, depreciation, amortisation, restructuring costs and sharebased payment charges. Prior year adjusted EBITDA has been restated to includethe holiday accrual charge. 2 Segment reporting Secondary reporting format - Geographical segments The analyses for the six months are as follows: Unaudited 30 September 2007 Unaudited 30 September 2006 UK Ireland Other Total UK Ireland Other Total £000 £000 £000 £000 £000 £000 £000 £000 Revenue 90,937 5,293 354 96,584 42,066 4,408 973 47,447Other segment informationSegment assets 144,364 11,059 - 155,423 88,135 10,392 - 98,527 Other segment informationCapital expenditure Property, plant and 855 161 - 1,016 305 37 - 342equipment Property, plant and - - - - 349 - 18 367equipment acquired -business combination Intangible asset - 193 - - 193 25 - - 25software Intangible assets - - - - 31,748 - - 31,748acquired - businesscombination The analysis for the year ended 31 March 2007 is as follows: Audited 31 March 2007 UK Ireland Other Total £000 £000 £000 £000 Revenue 101,805 9,778 1,372 112,955Other segment information Segment assets 140,315 11,852 30 152,197 Other segment informationCapital expenditure Property, plant and equipment 1,178 288 - 1,466 Property, plant and equipment acquired - business 1,463 - - 1,463combination Intangible asset - software 176 - - 176 Intangible assets acquired - business combination 22,075 - - 22,075 3 Restructuring costs During the period, the Group has undergone further restructuring mainly toachieve synergies from recent acquisitions. The restructuring charge for theperiod of £945,000 (31 March 2007 £2,792,000 and 30 September 2006: none) isemployee related costs of £989,000 (31 March 2007 £2,052,000) and occupancycosts written back of £44,000 (31 March 2007: cost of £740,000). 4 Earnings per share Basic earnings per share is calculated using a profit of £1,206,000 (30September 2006: profit of £1,002,000 and 31 March 2007: profit of £129,000) anda weighted average number of shares of 144,730,066 (30 September 2006:89,822,566 and 31 March 2007: 103,991,366). Diluted earnings per share is calculated using a diluted weighted average numberof shares of 145,299,250, the dilutive effect of share options at 30 September2007 was 569,184. There was no dilutive effect of share options in either periodto 30 September 2006 or 31 March 2007. In addition, adjusted EBITDA* per share has been shown on the grounds that it isa common metric used by the market in monitoring similar businesses. Thismeasure is derived as follows: Unaudited Six months Unaudited Six months Audited Year ended 30 ended 30 ended 31 September September March 2007 2006 2007 £000 £000 £000 Profit for the period 1,206 1,002 129Net finance costs/(income) 880 242 603Tax (1,033) (154) (1,173)Depreciation 893 514 1,241Amortisation of intangibles 3,020 952 2,804Share based payment charges 635 275 1,323Restructuring costs 945 - 2,792Adjusted EBITDA* 6,546 2,831 7,719 *earnings before interest, tax, depreciation, amortisation, restructuring costsand share based payment charges. Prior periods adjusted EBITDA has beenrestated to include the holiday accrual charge. 5 Goodwill Although there were no acquisitions made during the period the followingadjustments to goodwill have been made: Telecom Mobile Converged Managed Technology Central Total Solutions Solutions £000 £000 £000 £000 £000 £000 £000 Goodwill net carrying amount 31 March 26,322 5,919 23,696 6,256 7,383 - 69,5762007Comunica earn out - - 152 - - - 152Fair value adjustments 329 174 (253) - - - 250Costs of acquisition 340 - 107 - - - 447Goodwill net carrying amount 30 26,991 6,093 23,702 6,256 7,383 - 70,425September 2007 Customer contracts & related 6,511 2,320 15,316 358 345 270 25,120relationships, software, trademarks &licences and other intangibles 30September 2007Intangible assets 30 September 2007 33,502 8,413 39,018 6,614 7,728 270 95,545 6 Cash generated from operations Unaudited Six months Unaudited Six months Audited Year ended 30 ended 30 ended 31 September September March 2007 2006 2007 £000 £000 £000 Operating profit/(loss) 1,053 1,090 (441)Adjustments for:Depreciation of property, plant and equipment 893 514 1,241Amortisation of intangible assets 3,020 952 2,804Equity-settled share-based payments 478 301 472Cash-settled share-based payments 157 (26) 851Loss on disposal of property, plant and equipment (63) - (11)Movements in working capital(Increase)/decrease in inventories (217) 68 149Decrease/(increase) in trade and other receivables (4,084) 2,618 3,581(Decrease)/increase in trade and other payables 1,585 (2,863) (8,215)(Increase)/decrease in non-current assets 21 (94) 492(Decrease)/increase in provisions (208) (716) (1,197)Cash generated from operations 2,635 1,844 (274) 7 Events occurring after the balance sheet date On the 5 November 2007, Redstone acquired Marcom Communication Limited aprivately owned specialist hardware reseller that also offers voice solutions.The total consideration is £700k, such consideration being satisfied in cash£350k and equity £350k. Statement of Directors' Responsibilities The Directors' confirm that this condensed set of financial statements has beenprepared in accordance with IAS 34 as adopted by the European Union. The Directors of Redstone plc are listed in the Redstone plc Annual Report andAccounts for 31 March 2007. The only change in the period under review is thatOliver Vaughan, a Non-executive Director, resigned from the Board on 26September 2007. By order of the Board Independent Review Report to Redstone plc Introduction We have been engaged by the company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 30September 2007, which comprises the consolidated income statement, consolidatedbalance sheet, consolidated statement of changes in equity, consolidated cashflow statement and related notes. We have read the other information containedin the half-yearly financial report and considered whether it contains anyapparent misstatements or material inconsistencies with the information in thecondensed set of financial statements. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approvedby, the directors. The directors are responsible for preparing the half-yearlyfinancial report in accordance with the AIM Rules for Companies. As disclosed in note 1, the annual financial statements of the group areprepared in accordance with IFRSs as adopted by the European Union. Thecondensed set of financial statements included in this half-yearly financialreport has been prepared in accordance with International Accounting Standard34, "Interim Financial Reporting", as adopted by the European Union. Our responsibility Our responsibility is to express to the company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. This report, including the conclusion, has been prepared for and onlyfor the company for the purpose of the AIM Rules for Companies and for no otherpurpose. We do not, in producing this report, accept or assume responsibilityfor any other purpose or to any other person to whom this report is shown orinto whose hands it may come save where expressly agreed by our prior consent inwriting. Scope of review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, 'Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity' issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half-yearly financialreport for the six months ended 30 September 2007 is not prepared, in allmaterial respects, in accordance with International Accounting Standard 34 asadopted by the European Union and the AIM Rules for Companies. PricewaterhouseCoopers LLP Chartered Accountants 3 December 2007 Advisers Financial Adviser and Broker Investec Bank (UK) Limited, 2 Gresham Street London, EC2V 7QP Auditors PricewaterhouseCoopers LLP, Embankment Place, London, WC2N 6RH Solicitors Osborne Clarke, One London Wall, London, EC2Y 5EB Registrars Capita IRG Plc, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU Principal Bankers Barclays Bank plc, 54 Lombard Street, London, EC3V 9EX Company Number 3336134 Further details can be found on the Redstone website at the following address: www.redstone.co.uk This information is provided by RNS The company news service from the London Stock Exchange