30 Dec 2009 14:15
30 December 2009
REDSTONE PLC
("Redstone", "the Company" or "the Group")
Interim Report for the 6 months ended 30 September 2009
Redstone plc (AIM: RED.L) Redstone plc, the integrated ICT and Communications Solutions provider, today announces its interim results for the 6 months ended 30 September 2009.
FINANCIAL SUMMARY
£18.0m Bank Facilities renewed for a two year term, with permitted finance lease funding capacity of a further £3m
New £8.0m convertible loan facility established (of which £6m is committed and £3m has been drawn down to date)
Net Debt reduced by 36.5% to £17.2m (30 Sept 2008 £27.1m)
Revenue from Continuing Operations decreased by 25.9% to £49.3m (H1 08/09 £66.5m)
Selling, distribution and administrative costs of Continuing Operations decreased by £5.8m to £25.6m (H1 08/09 £31.4m) through cost reduction programme, despite expensed bid costs of £1.2m (H1 08/09 £0.4m)
Adjusted EBITDA* from Continuing Operations £1.2m loss (H1 08/09 £2.6m profit)
Operating loss £6.2m (H1 08/09 £1.5m) includes £1.5m (H1 08/09 £nil) goodwill impairment charge
Net Finance costs increased by £0.9m to £2.2m (H1 08/09 £1.3m) due to accelerated write off of costs associated with previous refinancing
Telecoms and Mobile businesses sold on 28 August 2009 for cash consideration of £16.5m. Profit on disposal £0.9m. Profit before taxation up to date of disposal £0.2m
Basic loss per share increased to 5.59p (H1 08/09: 1.41p)
* Before net finance costs, tax, depreciation, amortisation, exceptional items and share based payment charges from Continuing Operations
OPERATIONAL SUMMARY
Telecoms and Mobile divisions sold to reduce Bank Debt
Converged Solutions Division achieving contract wins with RBS, KPMG, London Borough of Bexley, Burnley College, Man Group & Titanic Quarter Belfast
Managed Services Division performing strongly with 42.2% growth in adjusted EBITDA
Selling, distribution and administrative costs from Continuing Operations reduced by £5.8m
Contract won for delivery of IT hardware and services for major BSF programme in Birmingham
Formation of new BSF Division with dedicated management team from 1 January 2010
Stephen Yapp, Executive Chairman, commented: "The Board believes that the Group has the resources and the opportunity to return to profitability. This process will take some time and is inevitably dependent on trading conditions improving as the country emerges from recession. However, the Board is optimistic for the future prospects of the Group."
ENQUIRIES:
| Redstone plc | Tel. +44 (0)845 203 3903 |
| Stephen Yapp, Executive Chairman | |
| FinnCap | Tel. +44 (0)20 7600 1658 |
| Marc Young, Charlotte Stranner | |
| ICIS Limited | Tel. +44 (0)20 7651 8688 |
| Tom Moriarty, Bob Huxford, Fiona Conroy |
CHAIRMAN'S STATEMENT
Introduction
These are the first interim results published since my appointment as your Executive Chairman of Redstone plc. As my predecessor, Alan Coppin, detailed in the preliminary announcement of results for the year ended 31 March 2009, the Group has undergone significant change prompted by the global financial crisis and the adverse impact on our industry. This process of change and refocusing is continuing as we reorganise the Group following the recent successful refinancing and disposal of the telecoms businesses.
On 13 October we announced the resignation of Mr Tim Perks and appointment of Mr Peter Hallett as CFO. Peter is experienced in financial restructuring and business turnaround situations, and is making good progress in re-shaping the Group.
Both Peter and I, along with Divisional Management have been actively engaged in talking to our major stakeholders and explaining how the recent refinancing has strengthened the balance sheet of the Group. The ongoing confidence of our key customers and suppliers in the financial stability of the Group is of the utmost importance. It has therefore been a pleasure to be able to confirm that the Group now has £26.0m of working capital facilities (£24.0m of which is committed) provided by the Bank and shareholders, of which £9.4m was undrawn as of 30 September 2009.
In addition, under the terms of the re-negotiated bank facility, the Group has the ability to raise capital lease or hire purchase finance in the ordinary course of business to a maximum of £3.0m.
We have continued the process of further decentralising and restructuring of the Group, to this end we have merged the Comunica and Redstone Converged Solutions businesses, devolved more autonomy to the Trading Divisions and begun the consequential reduction of central costs.
I have begun a review of the Building Schools for the Future ("BSF") Birmingham Contract, which has potential revenues of up to £150m over 15 years, and which also presents an opportunity for the Group to establish itself in a new market. We will create a new division with its own dedicated management team from 1 January 2010, which in the short term will be headed by Tim Sherwood, Non Executive Deputy Chairman of the Company, as we search for a permanent Managing Director.
We have many opportunities and challenges ahead of us in the coming years, and we are currently putting in place a management incentive plan to ensure that management are effectively incentivised and are aligned to the delivery of profit objectives and shareholder returns.
Operational Review
Converged Solutions
The market is still experiencing difficulties with fewer major project spends in the commercial sectors. However, the Converged Solutions division has still succeeded in winning a number of key projects with clients including RBS, KPMG, London Borough of Bexley, Burnley College, MAN Group and the award of our FTTx solution for Titanic Quarter in Belfast.
The division has worked hard on integrating the back office systems of the two trading entities of which it is comprised (Comunica Ltd and RCS Ltd) and is establishing a common market approach and delivery philosophy which will continue to be developed over the next 6 months.
A number of key projects have been completed during the period including the Westfield London project which was delivered on time and within budget. As a result of the cost restructuring of the business last year, we remain highly competitive and despite the unfavourable market conditions have been able to maintain our market share.
The support and managed services part of the Converged Solutions division is performing well. The completed consolidation of three offices into one new facility in Elstree is proving highly successful, both in terms of cost and operational benefits. Elstree provides pre-termination of cabling solutions and pre-staging of networking solutions in a customer friendly environment which has received very positive feedback from our clients.
Our key growth areas will be IP based Physical Security solutions, delivered through our "OneNET" intelligent building platform, and supported by Cisco and DVTel; the further development of our support and desktop services; "FTTx" solutions in the Titanic Quarter in Belfast; and increased focus on ICT and infrastructure solutions.
Managed Solutions
The Managed Solutions division is trading strongly in difficult market conditions. Our ISP Business continues to grow revenue at 20% per annum which is reflected in our reported Adjusted EBITDA growth of 42.2% as at the half year.
Managed Solutions continues to work ever more closely with key strategic partners such as Computer Associates, IBM, Sophos, McAfee and Microsoft to create sustainable growth in carefully defined segments of the IT security market. Managed Solutions continues to focus on sophisticated IT security solutions for key clients and on developing a range of initiatives to strengthen Redstone's position as a recognised ICT security solutions expert.
Technology
The first half of 2009 represented the most difficult trading environment encountered in Ireland since the formation of the company. While the European economy was in recession, the speed and scale of the downturn in Ireland was unprecedented.
In response to the economic climate the management team restructured the business in the first quarter of the financial year. This included headcount and cost reductions and a restructuring of the service business with a significant focus on multi-year recurring revenue.
Restructuring has achieved annualised cost savings of £1.2m and allowed us to deliver a satisfactory result in the first half with Adjusted EBITDA of £0.12m which was ahead of budget.
While the economy in Ireland remains challenging we are confident that our restructured business which includes the introduction of advanced services capabilities combined with focused lead generation initiatives will ensure that the Technology division continues to trade profitably. However, we have prudently taken the view that goodwill has been impaired by an estimated £1.5m due to the impact of the recession on our public sector business in Ireland.
Building Schools for the Future ("BSF")
As explained above, this element of the Converged Solutions division will constitute a separate trading division from 1 January, with a dedicated management team, headed up in the interim by Non-Executive Deputy Chairman Tim Sherwood.
The immediate operational focus is the delivery of the first phase of the Birmingham BSF contract, and the team is working hard to secure financial close on all other phases of the total scheme during 2010. Phase 1 will see delivery of a data centre and the first 5 Birmingham schools scheduled for transformation under the BSF scheme.
The division will also be responsible for the bidding activity in respect of other BSF contracts. The division has recently been invited to submit final bids for the ICT element of the BSF contract in Portsmouth.
Bid costs expensed of £1.2m at the half year (H1 08/09 £0.4m) include the accelerated write off of costs incurred in bidding for BSF Lancashire. The Group has no further liability in respect of BSF Lancashire.
Financial Highlights
Revenues
Revenue from Continuing Operations decreased by 25.9% to £49.3m (H1 08/09 £66.5m). However, £16.2m of the decrease was reported in the Converged Solutions division due mainly to completion of the White City contract in H1 08/09.
Managed Solutions revenues have grown 10.4% to £9.4m (H1 08/09 £8.5m), despite H1 08/09 results including Lancashire BSF revenue of £1.9m (H1 09/10 £0.1m). Therefore strong underlying growth was achieved in the connectivity and security businesses which increased revenue by 53% and 63% respectively, reflecting the strength of the divisions integrated strategy.
The Technology division, based in Ireland, saw turnover fall by £1.9m as its government departmental clients reined in expenditure in response to severe retrenchment of the national economy.
Gross Profit
Gross profit from continuing businesses decreased by £10.4m, due principally to the fall in Converged Solution revenue attributable to completion of White City in H1 08/09.
Gross margin decreased to 40.1%, from 45.4% in H1 08/09.
Operating Expenses
Operating expenses (comprising Selling & Distribution costs and administrative expenses) in Continuing Operations, excluding exceptional items, decreased by £5.8m or 18.5% to £25.6m (H1 08/09 £31.4m), reflecting the impact of cost reduction measures.
EBITDA & Profitability of Continuing Operations
Adjusted EBITDA* has decreased by £3.8m to a loss of £1.2m in the period (H1 08/09 £2.6m profit). This is mainly attributable to Converged Solutions, which accounted for £4.1m of the decrease.
Converged solutions expensed bid costs of £1.2m during the period (H1 08/09 £0.4m) and H1 08/09 also included the profitable completion of the White City contract. Nevertheless, it is a disappointing result for the division, reflecting difficult conditions in the market place, and this has prompted the restructuring of the operating cost base. As a result the division will be well placed for future recovery.
Technology adjusted EBITDA* was similarly disappointing, reporting a decrease of £0.2m or 67% albeit in the face of an unprecedented and rapid economic downturn in Ireland.
Managed Solutions has performed well in the period, reporting adjusted EBITDA* growth of £0.2m or 42.2%, and is well positioned to make continued progress.
Central costs reduced by £0.6m to £2.4m (H1 08/09 £3.0m). As reported above we are actively engaged in the decentralisation of the Group, and are seeking to further reduce central costs.
Total deductions of £5.0m (H1 08/09 £4.2m) from adjusted EBITDA*, comprising depreciation & amortisation of £2.3m (H1 08/09 £2.8m), goodwill impairment in respect of the Technology Division of £1.5m (H1 08/09 £nil), exceptional items of £0.4m (H1 08/09 £0.4m) and share based incentive payments of £0.7m (H1 08/09 £1.0m), result in an Operating Loss from Continuing Operations for the period of £6.2m (H1 08/09 £1.5m).
Exceptional items comprise £0.4m of consultancy fees associated with restructuring, £0.4m of employment costs arising from restructuring and general redundancy, and a credit of £0.4m arising from the £0.7m reversal of the IFRS2 provision for share based payments to the former CEO less £0.3m of costs associated with his compromise agreement.
Net finance costs amounted to £2.2m (H1 08/09 £1.3m). The increase is largely attributable to the accelerated write-off of £1.5m of costs associated with refinancing prior to the 28 September 2009.
The resulting loss before taxation is £8.4m (08/09 £2.8m). The tax credit for the period of £0.3m (08/09 £0.7m) arises from the reduction in deferred taxation liabilities in line with amortisation of intangible assets recognised on acquisition. The resulting loss for the period in respect of Continuing Operations is therefore £8.1m (08/09 £2.1m).
*Before net finance costs, tax, depreciation, amortisation, exceptional items and share based payments
Discontinued Operations
On 28 August 2009, Redstone disposed of its Telecoms and Mobile businesses for a net cash consideration of £16.5m before costs. The net proceeds were used to significantly reduce the Group's bank debt.
The overall profit for the period in respect of the Discontinued Operations is £1.3m (H1 08/09 £1.0m).
This comprises the trading results of the telecoms businesses for the period up to disposal on 28 August 2009 which produced a profit before taxation of £0.2m (H1 08/09 £1.0m), and a net profit on disposal of the businesses of £0.9m. This includes a £1.3m taxation credit in respect of the deferred taxation liability relating to unamortised intangible assets.
Overall Result for the Period
The net loss for the period from continuing and discontinued operations is £6.9m (H1 08/09 £1.1m).
Adjusted basic EBITDA per share has reduced to a loss of 0.82p (H1 08/09 1.82p profit). Basic loss per share has increased to 5.59p (H1 08/09 1.41p).
Cashflow
The net cash outflow from operating activities was £5.0m (H1 08/09 £3.4m), of which £4.9m was invested in working capital (H1 08/09 £8.0m). The net decrease in cash and cash equivalents was £6.9m (H1 08/09 £2.5m).
Cash and Debt Facilities
Overdraft and term debt facilities totalling £18.0m were re-negotiated with Barclays Bank PLC in September, and are now in place for a further two years.
In addition, a new £8.0m convertible loan facility (of which £6m is committed) provided by Gartmore and SVG Investment Managers, was put in place during September 2009. Funding of £3m was immediately drawn under the facility. A circular was sent to shareholders on 10 December outlining the terms of the convertible loan, and serving notice of an EGM to be held on 30 December 2009 to approve the facility.
Therefore the Group currently has total facility headroom potential of £26.0m under the terms of its banking and convertible loan facilities of which £24.0m is committed. As at 30 September 2009, the Group had drawn down £16.6m against available facilities.
In addition, under the terms of the re-negotiated Banking Facility, the Group has the ability to raise capital lease or hire purchase finance in the ordinary course of business to a maximum of £3.0m. It is envisaged that this will be mainly used to provide capital funding in respect of the BSF Birmingham contract.
Board Changes
A number of changes to the Board were made during the six month period to 30 September 2009.
On 28 April 2009, Martin Balaam stepped down from his role as Chief Executive Officer. Alan Coppin, who had served Redstone plc as Chairman and Non-Executive Director since 28 June 2006, then became interim Executive Chairman. On 17 September 2009, Stephen Yapp joined the Board as a Non-Executive Director. Mr Coppin retired as Executive Chairman of the Board on 30 September 2009, and was replaced by Stephen Yapp.
On 13 October 2009, Mr Peter Hallett joined the Board as Chief Financial Officer. Peter replaced Tim Perks who resigned from the Board.
Outlook
The economic environment continues to provide a difficult trading background for the Group's activities. Whilst the last six months has been a very difficult period for the Group, it has emerged with a clear vision of what is structurally required to return the Group to profitability.
We now have working capital facilities that will enable us to deliver our medium term forecasts, and the opportunity in BSF Birmingham to establish an attractive fourth division of the Group, in a market where there will be further opportunities for proven participants.
Our Converged Solutions and Technology businesses are facing tough challenges in their respective markets, though we believe the current core of these businesses to be stable, and together with the cost reduction measures already implemented should provide them with a good base to re-establish profitable growth.
The Managed Solutions business has a proven strategy that is delivering growth. It is shortly to move to larger office premises that will provide the additional space required to consolidate the business.
The Board believes that the Group has the resources and the opportunity to return to profitability. This process will take some time and is inevitably dependent on trading conditions improving as the country emerges from recession. However, the Board is optimistic for the future prospects of the Group.
Stephen Yapp
Executive Chairman
Consolidated Income Statement
| Unaudited Six months ended 30 September 2009 | Unaudited Six months ended 30 September 2008 | Unaudited Year ended 31 March 2009 | ||
| Restated | Restated | |||
| Note | £000 | £000 | £000 | |
| Continuing operations | ||||
| Revenue | 2 | 49,259 | 66,454 | 123,068 |
| Cost of sales | (29,503) | (36,260) | (65,534) | |
| Gross profit | 19,756 | 30,194 | 57,534 | |
| Other operating income | 75 | 75 | 185 | |
| Selling and distribution costs | (4,048) | (5,643) | (11,772) | |
| Administrative expenses | (21,547) | (25,752) | (71,091) | |
| Exceptional items | 3 | (409) | (379) | (1,338) |
| Adjusted EBITDA* | (1,189) | 2,647 | 819 | |
| Depreciation | (1,015) | (938) | (1,902) | |
| Amortisation of intangibles | (1,331) | (1,858) | (3,088) | |
| Goodwill impairment | (1,535) | - | (19,174) | |
| Exceptional items | (409) | (379) | (1,338) | |
| Share-based payments | (694) | (977) | (1,799) | |
| Operating Loss | (6,173) | (1,505) | (26,482) | |
| Finance income | 320 | 57 | 160 | |
| Finance costs | (2,552) | (1,321) | (4,717) | |
| Net finance cost | (2,232) | (1,264) | (4,557) | |
| Loss on ordinary activities before taxation | (8,405) | (2,769) | (31,039) | |
| Tax on loss on ordinary activities | 255 | 719 | (739) | |
| Loss for the period from continuing operations (attributable to shareholders of the parent Company) | (8,150) | (2,050) | (31,778) | |
| Profit /(Loss) for the period from discontinued operations | 7 | 1,289 | 990 | (23,214) |
| Loss for the period | (6,861) | (1,060) | (54,992) | |
| Earnings per share | ||||
| Basic earnings per share | 4 | (5.59) p | (1.41) p | (21.80) p |
| Diluted earnings per share | 4 | (5.59) p | (1.41) p | (21.80) p |
| Basic adjusted EBITDA* per share | (0.82) p | 1.82 p | 0.56 p | |
| Diluted adjusted EBITDA* per share | (0.82) p | 1.82 p | 0.56 p |
*earnings from Continuing Operations before interest, tax, depreciation, amortisation, exceptional items and share-based payments.
Statement of comprehensive income
| Unaudited Six months ended 30 Sep 09 £000 | Unaudited Six months ended 30 Sep 08 £000 | Audited Year ended 31 Mar 09 £000 | |
| Loss for the period | (6,861) | (1,060) | (54,992) |
| Currency translation differences | 97 | (51) | 64 |
| Total comprehensive income | (6,764) | (1,111) | (54,928) |
Consolidated Statement of Changes in Equity
| Other reserves | ||||||||
| Called up share capital | Share premium account | Merger reserve (a) | Capital Redemption reserve (b) | Translation reserve (c) | Retained earnings | Total equity | ||
|
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
| At 1 April 2008 | 14,574 | 18,159 | 216 | 5,683 | 48 | 37,385 | 76,065 | |
| Total comprehensive income | - | - | - | - | (51) | (1,060) | (1,111) | |
| Transactions with owners: | ||||||||
| Stock compensation charge | - | - | - | - | - | 1,032 | 1,032 | |
| Purchase of own shares (d) | - | - | - | - | - | (500) | (500) | |
| At 30 September 2008 | 14,574 | 18,159 | 216 | 5,683 | (3) | 36,857 | 75,486 | |
| Total comprehensive income | - | - | - | - | 115 | (53,932) | (53,817) | |
| Transactions with owners: | ||||||||
| Stock compensation charge | - | - | - | - | - | 751 | 751 | |
| Purchase of own shares (d) | - | - | - | - | - | (417) | (417) | |
| At 1 April 2009 | 14,574 | 18,159 | 216 | 5,683 | 112 | (16,741) | 22,003 | |
| Total comprehensive income | - | - | - | - | 97 | (6,861) | (6,764) | |
| Transactions with owners: | ||||||||
| Stock compensation charge | - | - | - | - | - | 84 | 84 | |
| Purchase of own shares (d) | (110) | (110) | ||||||
| At 30 September 2009 | 14,574 | 18,159 | 216 | 5,683 | 209 | (23,628) | 15,213 | |
(a) Merger reserve
The merger reserve resulted from the acquisition of Redstone Communications Limited (formerly Redstone Network Services Limited) and represents the difference between the value of the shares acquired (nominal value plus related share premium) and the nominal value of the shares issued.
(b) Capital redemption reserve
The capital redemption reserve arose on the elimination of deferred shares and represents the nominal value of the deferred shares.
(c) Translation reserve
The translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.
(d) Repurchase of own shares
Shares in Redstone plc purchased by and held in the Employee Benefit Trust have been recognised in retained earnings, in accordance with SIC 12 and IAS 32.
Consolidated Balance Sheet
| Unaudited 30 September 2009 | Unaudited 30 September 2008 | Audited 31 March 2009 | ||
| £000 | £000 | £000 | ||
| Assets | ||||
| Non-current assets | ||||
| Intangible assets | 28,965 | 91,461 | 45,945 | |
| Investments | - | 55 | - | |
| Property, plant and equipment | 4,950 | 5,335 | 5,511 | |
| Deferred tax asset | 1,354 | 3,215 | 1,353 | |
| Other non-current assets | 431 | 637 | 467 | |
| 35,700 | 100,703 | 53,276 | ||
| Current assets | ||||
| Inventories | 1,827 | 2,463 | 2,262 | |
| Trade and other receivables | 29,863 | 50,396 | 42,799 | |
| Income tax receivable | 651 | 562 | 632 | |
| Cash and cash equivalents | 430 | 7,155 | 7,368 | |
| 32,771 | 60,576 | 53,061 | ||
| Total assets | 68,471 | 161,279 | 106,337 | |
| Equity and liabilities | ||||
| Equity | ||||
| Called up share capital | 14,574 | 14,574 | 14,574 | |
| Share premium account | 18,159 | 18,159 | 18,159 | |
| Other reserves | 6,108 | 5,896 | 6,011 | |
| Retained earnings (Deficit) | (23,628) | 36,857 | (16,741) | |
| Total equity | 15,213 | 75,486 | 22,003 | |
| Current liabilities | ||||
| Trade and other payables | 28,720 | 44,553 | 44,083 | |
| Derivative financial instruments | - | - | 415 | |
| Deferred consideration | 30 | 100 | 30 | |
| Borrowings | 3,805 | 5,568 | 29,824 | |
| Provisions | 286 | 442 | 354 | |
| 32,841 | 50,663 | 74,706 | ||
| Non-current liabilities | ||||
| Trade and other payables | 96 | 99 | 177 | |
| Derivative financial instruments | 2,858 | 505 | 2,019 | |
| Borrowings | 13,838 | 28,203 | 1,821 | |
| Provisions | 637 | 949 | 800 | |
| Deferred tax liability | 2,988 | 5,374 | 4,811 | |
| 20,417 | 35,130 | 9,628 | ||
| Total liabilities | 53,258 | 85,793 | 84,334 | |
| Total equity and liabilities | 68,471 | 161,279 | 106,337 |
Consolidated Cash Flow Statement
| Unaudited Six months ended 30 September 2009 | Unaudited Six months ended 30 September 2008 | Audited Year ended 31 March 2009 | ||
| Note | £000 | £000 | £000 | |
| Cash flows from operating activities | ||||
| Cash (absorbed)/ generated in operations | 6 | (5,025) | (3,426) | 3,034 |
| Income tax paid/(received) | (19) | 15 | (214) | |
| Net cash flows (used in)/generated from operating activities | (5,044) | (3,411) | 2,820 | |
| Cash flows from investing activities | ||||
| Proceeds from sale of property, plant and equipment | - | 4 | - | |
| Purchase of property, plant and equipment | (1,750) | (1,730) | (2,946) | |
| Purchase of intangible assets | (188) | (463) | (1,094) | |
| Sale of business operation, net of costs | 7 | 14,765 | ||
| Acquisition of subsidiaries, net of cash acquired | - | - | (20) | |
| Net cash flows generated from / (used in) investing activities | 12,827 | (2,189) | (4,060) | |
| Cash flows from financing activities | ||||
| Proceeds from borrowings | 2,733 | 7,785 | 7,917 | |
| Repayment of borrowings | (15,637) | (3,500) | (6,000) | |
| Interest received | - | 58 | 160 | |
| Finance costs | (1,817) | (1,197) | (3,078) | |
| Net cash flows (used in)/ generated from financing activities | (14,721) | 3,146 | (1,001) | |
| Net (decrease) in cash and cash equivalents | (6,938) | (2,454) | (2,241) | |
| Cash and cash equivalents at 1 April | 7,368 | 9,609 | 9,609 | |
| Effects of currency translation on cash and cash equivalents | - | - | - | |
| Cash and cash equivalents at 30 September/31 March | 430 | 7,155 | 7,368 |
Notes to the half-yearly financial information
1 Basis of preparation and general information
The interim financial information is unaudited but has been reviewed by the auditors, PricewaterhouseCoopers LLP, and their report to Redstone plc is set out at the end of this announcement.
This condensed, consolidated half-yearly financial information for the half-year ended 30 September 2009 has been prepared in accordance with IAS 34, 'Interim financial reporting' as adopted by the European Union. The half-yearly consolidated financial report should be read in conjunction with the annual financial statements for the year ended 31 March 2009, which have been prepared in accordance with IFRSs as adopted by the European Union.
This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2009 were approved by the Board of directors on 28 September 2009 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 237 of the Companies Act 1985.
The interim report was approved by the Board on 30 December 2009 .
Accounting policies
The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 March 2009, as described in those annual financial statements with the exception of the following new standards and amendments to standards, which are mandatory for the first time for the financial year beginning 1 January 2009.
● IAS 1 (revised), 'Presentation of financial statements'. The revised standard prohibits the presentation of items of income and expenses (that is 'non-owner changes in equity') in the statement of changes in equity, requiring 'non-owner changes in equity' to be presented separately from owner changes in equity. All 'non-owner changes in equity' are required to be shown in a performance statement. Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). The group has elected to present two statements: an income statement and a statement of comprehensive income. The interim financial statements have been prepared under the revised disclosure requirements.
● IFRS 8, 'Operating segments'. IFRS 8 replaces IAS 14, 'Segment reporting'. It requires a 'management approach' under which segment information is presented on the same basis as that used for internal reporting purposes. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the board of directors. This has led to no change in the information reported by the Group.
The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 April 2009, but are not currently relevant for the group: ● IAS 23 (amendment), 'Borrowing costs'.
● IFRS 2 (amendment), 'Share-based payment'.
● IAS 32 (amendment), 'Financial instruments: Presentation'.
● IFRIC 13, 'Customer loyalty programmes'.
● IFRIC 15, 'Agreements for the construction of real estate'.
● IFRIC 16, 'Hedges of a net investment in a foreign operation'.
● IAS 39 (amendment), 'Financial instruments: Recognition and measurement'.
The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 January 2009 and have not been early adopted: ● IFRS 3 (revised), 'Business combinations' and consequential amendments to IAS 27, 'Consolidated and separate financial statements', IAS 28, 'Investments in associates' and IAS 31, 'Interests in joint ventures', effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. Management is assessing the impact of the new requirements regarding acquisition accounting, consolidation and associates on the group.
● IFRIC 17, 'Distributions of non-cash assets to owners', effective for annual periods beginning on or after 1 July 2009. This is not currently applicable to the group, as it has not made any non-cash distributions. ● IFRIC 18, 'Transfers of assets from customers', effective for transfer of assets received on or after 1 July 2009. This is not relevant to the group, as it has not received any assets from customers.
Prior year comparatives have been restated to represent Continuing Operations following the disposal of the telecoms and mobile divisions.
Going Concern
The consolidated financial statements of Redstone plc have been prepared on the going concern basis and in accordance with EU Endorsed International Financial Reporting Standards (IFRS), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative financial instruments) at fair value through profit or loss.
The Directors are required to be satisfied that the Group has adequate resources to continue in business for the foreseeable future. The validity of this assumption depends on the ability of the Group to meet its cash flow forecasts and the continuing support of its bankers by providing adequate overdraft facilities and of its debt holders. The Group has agreed new facilities with Barclays Bank through to 30 September 2011, and the bank has agreed to waive any default of covenants tests, prior to 31 December 2010. Whilst the nature of the Group's business is such that there can be considerable variation in the cash inflows and this adds risk to the Group's ability to forecast cash, and in the current economic environment there can be no absolute certainty that the Group will achieve its EBITDA forecasts, the present cash flow forecasts indicate that the Group will be able to operate within the present overdraft facilities for at least 12 months from the date of approval of the interim financial statements.
In September 2009, the Group completed a fund raising of up to £6 million, with provision for a further £2 million, through the issue of a loan note to two existing shareholders, SVG Investment Managers Limited and Gartmore Investment Limited, £3 million of which has been drawn down and the remaining tranche can be requested by the Group at any time provided there has not been a material adverse change in the operating performance or debt position of the Group. The loan notes are secured on the assets of the business, and this security is secondary to the Barclays Bank facilities.
Under the terms of the loan note arrangement, a premium equal to 2 times the outstanding principal amount is payable on the maturity date on 1 October 2011, and in the event that the approval of the shareholders of the terms of the conversion and/or the approval of the Panel on Takeovers and Mergers to waive rule 9 of the City Code on Takeovers and Mergers is not obtained, an additional superpremium equal to 2 times the principal drawn down is payable at maturity. A circular outlining the terms of the loan notes was sent to shareholders on 10 December 2009.
If the loan notes are not converted into equity or repaid, then on 1 October 2011, this will lead to the Group's liabilities that have fallen due significantly exceeding the Group's assets. The note holders have confirmed to the Group that in the event that the Group is unable to make repayment of the loan notes on their maturity date, they would expect to work with the Group to refinance the loan notes, for example through converting the loan notes into shares, alternative financing arrangements or through extending the maturity date; and that it is not their current intention to wind up the Company in the event that it is unable to repay the loan notes on the maturity date. For these reasons the Directors believe the going concern basis to be appropriate.
2 Segment reporting
(a) Unaudited for the six months ended 30 September 2009
| Continuing Operations | Converged Solutions | Managed Solutions | Technology | Central | Total |
|
| £000 | £000 | £000 | £000 | £000 |
| Total segment revenue | 35,865 | 9,940 | 3,993 | - | 49,798 |
| Inter-segment revenues | - | (539) | - | - | (539) |
| Revenue | 35,865 | 9,401 | 3,993 | - | 49,259 |
| Adjusted operating costs* | (36,524) | (8,747) | (3,871) | (1,306) | (50,448) |
| Adjusted EBITDA* | (659) | 654 | 122 | (1,306) | (1,189) |
| Depreciation | (388) | (178) | (169) | (280) | (1,015) |
| Share based payments | (277) | (99) | (56) | (262) | (694) |
| Impairment of Goodwill | - | - | (1,535) | - | (1,535) |
| Amortisation of intangible assets | (825) | (64) | (22) | (420) | (1,331) |
| Exceptional items | (258) | - | (22) | (129) | (409) |
| Segment result | (2,407) | 313 | (1,682) | (2,397) | (6,173) |
| Net finance costs | (2,232) | ||||
| Tax | 255 | ||||
| Loss for the year | (8,150) | ||||
| Assets and liabilities | |||||
| Segment assets | 42,826 | 15,468 | 5,356 | 4,821 | 68,471 |
| Segment liabilities | 23,118 | 3,880 | 2,277 | 23,983 | 53,258 |
| Other segment information | |||||
| Capital expenditure | |||||
| Property, plant and equipment | 628 | 173 | 10 | 899 | 1,710 |
| Intangibles - software | - | - | - | 188 | 188 |
| Depreciation | 388 | 178 | 169 | 280 | 1,015 |
| Amortisation | 825 | 64 | 22 | 420 | 1,331 |
* earnings from Continuing Operations before interest, tax, depreciation, amortisation, exceptional items and share-based payments.
(b) Unaudited for the six months ended 30 September 2008 (Restated)
| Continuing Operations | Converged Solutions | Managed Solutions | Technology | Central | Total |
|
| £000 | £000 | £000 | £000 | £000 |
| Total segment revenue | 52,195 | 8,518 | 5,865 | - | 66,578 |
| Inter-segment revenues | (124) | - | - | - | (124) |
| Revenue | 52,071 | 8,518 | 5,865 | - | 66,454 |
| Adjusted operating costs* | (48,582) | (8,058) | (5,499) | (1,668) | (63,807) |
| Adjusted EBITDA* | 3,489 | 460 | 366 | (1,668) | 2,647 |
| Depreciation | (336) | (256) | (117) | (229) | (938) |
| Share based payments | (208) | (75) | (43) | (651) | (977) |
| Amortisation of intangible assets | (1,581) | (98) | (31) | (148) | (1,858) |
| Exceptional items | (53) | - | - | (326) | (379) |
| Segment result | 1,311 | 31 | 175 | (3,022) | (1,505) |
| Net finance costs | (1,264) | ||||
| Tax | 719 | ||||
| Loss for the year | (2,050) | ||||
| Assets and liabilities | |||||
| Segment assets | 69,696 | 16,130 | 10,899 | 6,817 | |
| Segment liabilities | 24,120 | 7,455 | 2,519 | 35,881 | |
| Other segment information | |||||
| Capital expenditure | |||||
| Property, plant and equipment | 212 | 251 | 52 | 387 | 902 |
| Intangibles - software | 33 | - | - | 420 | 453 |
| Depreciation | 336 | 256 | 117 | 229 | 938 |
| Amortisation | 1,581 | 98 | 31 | 148 | 1,858 |
* earnings from Continuing Operations before interest, tax, depreciation, amortisation, exceptional items and share-based payments.
c) Unaudited for the year ended 31 March 2009 (Restated)
| Continuing Operations | Converged Solutions | Managed Solutions | Technology | Central | Total |
|
| £000 | £000 | £000 | £000 | £000 |
| Total segment revenue | 92,235 | 18,383 | 14,037 | - | 124,655 |
| Inter-segment revenues | (343) | (1,178) | (66) | - | (1,587) |
| Revenue | 91,892 | 17,205 | 13,971 | - | 123,068 |
| Adjusted operating costs* | (90,250) | (15,595) | (13,514) | (2,890) | (122,249) |
| Adjusted EBITDA* | 1,642 | 1,610 | 457 | (2,890) | 819 |
| Depreciation | (710) | (434) | (289) | (469) | (1,902) |
| Share based payments | (332) | (108) | (76) | (1,283) | (1,799) |
| Impairment of goodwill | (15,716) | - | (3,458) | - | (19,174) |
| Amortisation of intangible assets | (2,436) | (195) | (63) | (394) | (3,088) |
| Exceptional items | (712) | (53) | (55) | (518) | (1,338) |
| Segment result | (18,264) | 820 | (3,484) | (5,554) | (26,482) |
| Net finance costs | (4,557) | ||||
| Tax | (739) | ||||
| Loss for the year | (31,778) | ||||
| Assets and liabilities | |||||
| Segment assets | 49,340 | 15,238 | 7,670 | 3,548 | |
| Segment liabilities | 24,666 | 4,934 | 2,929 | 37,141 | |
| Other segment information | |||||
| Capital expenditure | |||||
| Property, plant and equipment | 533 | 690 | 327 | 492 | 2,042 |
| Intangibles - software | 69 | - | - | 934 | 1,003 |
| Depreciation | (710) | (434) | (289) | (469) | (1,902) |
| Amortisation | (2,436) | (195) | (63) | (394) | (3,088) |
* earnings from Continuing Operations before interest, tax, depreciation, amortisation, exceptional items and share-based payments.
3 Exceptional items
The exceptional charge for the period of £409,000 (31 March 2009: £1,713,000 and 30 September 2008: £560,000) is predominantly made up of consultancy fees in association with the group restructuring £392,000, employee costs associated with restructure and redundancies of £392,000, costs associated with the compromise agreement in respect of former CEO £357,000, and reversal of the IFRS2 share based payments charge in respect of former CEO of £732,000.
4 Earnings per share
Basic earnings per share is calculated using a loss of £8,150,000 (31 March 2009: loss £31,778,000 and 30 September 2008: loss £2,050,000) and a weighted average number of shares of 145,732,516 (31 March 2009: 145,732,516 and 30 September 2008: 145,732,516).
There was no dilutive effect of share options at 30 September 2009 (31 March 2009: None and 30 September 2008: None).
In addition, adjusted EBITDA* per share has been shown on the grounds that it is a common metric used by the market in monitoring similar businesses. This measure is derived as follows:
| Unaudited Six months ended 30 September 2009 (Restated) | Unaudited Six months ended 30 September 2008 (Restated) | Unaudited Year ended 31 March 2009 (Restated) | |
| £000 | £000 | £000 | |
| (Loss)/profit from continuing operations for the period | (8,150) | (2,050) | (31,778) |
| Net finance expense | 2,232 | 1,264 | 4,557 |
| Tax credit | (255) | (719) | 739 |
| Depreciation | 1,015 | 938 | 1,902 |
| Amortisation of intangibles | 1,331 | 1,858 | 3,088 |
| Goodwill Impairment | 1,535 | - | 19,174 |
| Share based payments | 694 | 977 | 1,799 |
| Exceptional items | 409 | 379 | 1,338 |
| Adjusted EBITDA* | (1,189) | 2,647 | 819 |
*earnings from Continuing Operations before interest, tax, depreciation, amortisation, exceptional items and share based payments.
5 Goodwill
Although there were no acquisitions made during the period the following adjustments to goodwill have been made:
| Telecom | Mobile | Converged Solutions | Managed Solutions | Technology | Total | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Goodwill net carrying amount 30 September 2008 | 27,771 | 6,113 | 23,499 | 6,256 | 7,383 | 71,022 |
| Impairment of Goodwill | (20,515) | (4,082) | (15,716) | - | (3,458) | (43,771) |
| Cost of acquisitions | ||||||
| Fair value adjustments | (50) | - | - | - | - | (50) |
| Goodwill net carrying amount 31 March 2009 | 7,206 | 2,031 | 7,783 | 6,256 | 3,925 | 27,201 |
| Fair value adjustments | ||||||
| Reclassification of Marcom Goodwill | (804) | - | 804 | - | - | - |
| Impairment of Goodwill | (1,535) | (1,535) | ||||
| Disposal | (6,402) | (2,031) | - | - | - | (8,433) |
| Goodwill net carrying amount 30 September 2009 | - | - | 8,587 | 6,256 | 2,390 | 17,233 |
| As at 30 September 2009 | As at 30 September 2008 | As at 31 March 2009 | |
| Goodwill cost at 30 September | 37,942 | 71,022 | 70,972 |
| Accumulated impairment losses at 30 September | (20,709) | - | (43,771) |
| Net carrying amount at 30 September | 17,233 | 71,022 | 27,201 |
Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. At the half year, the directors have assessed the carrying value of goodwill due to ongoing difficult trading conditions. Goodwill was allocated for impairment testing purposes to cash generating units (CGUs) as follows:
Converged Solutions;
Managed Solutions; and
Technology.
These CGUs represent the lowest level within the Group at which goodwill was monitored by management for internal reporting purposes, and the level that represented the smallest identifiable group of assets which generated largely independent cash inflows. The recoverable amount of all the CGUs was based on a value in use calculation using forecast cash flow projections extrapolated for a further 4 years by growth rates applicable to each unit. An appropriate terminal value based on a perpetuity calculation using 2% real growth was then added. Discount rates were then applied to these projections ranging from 12% to 15% reflecting management's expected risk profile for each CGU. In addition to revenue growth, the assumptions used in the impairment testing were as follows:
Gross margin percentage;
Discount rate; and
Rates of growth in cash generating units beyond the budget period, and in determining the terminal value.
Gross margins have been based on flat or declining margins starting at current levels. Where declining margins have been assumed at 0.5% per year in certain CGU's, this allows for cost increases from network providers, suppliers and competitive market influences. This has been assumed in respect of Redstone Technology and part of Redstone Converged Solutions. The assumption of margins remaining flat assumes a mix of cost savings in service delivery offset by competitive market influences. This has been applied in respect of Redstone Managed Solutions and part of Redstone Converged Solutions.
A discount rate of 15% was applied to the Converged Solutions CGU because it is dependent on strong relationships with certain key suppliers and the projects it delivers are complex in nature. A discount rate of 12% was applied to the Managed Solutions which reflects management's estimate of ROCE required. The Managed Solutions CGU and Technology CGU have an element of recurring revenue through maintenance contracts and this reduces the risk inherent in the businesses. However, a discount rate of 15% was applied in respect of Technology based on Management's current perception of the risks in the local economic environment.
After the initial period covered by the latest budget revenues were projected to grow at between 2% and 3% for the following 4 years. Cost growth after the budget period was projected at between 1% and 3%. Cost growth assumptions were linked to the revenue growth assumptions with an allowance for the decline in gross margins as set out above. Capital expenditure growth after the budget forecast period is projected at 2% across all divisions where there is significant capital spend.
Following the impairment review of the goodwill the Directors considered it necessary to record a goodwill impairment charge in the year of £1,535,000 (31 March 2009: £43,771,000; 30 September 2008: nil).
6 Net Cash flows from operating activities
| Unaudited Six months ended 30 September 2009 | Unaudited Six months ended 30 September 2008 | Audited Year ended 31 March 2009 | |
| £000 | £000 | £000 | |
| Operating (loss) from continuing operations | (6,173) | (1,505) | (26,482) |
| Operating profit/(loss) from discontinuing operations | 178 | 990 | (23,214) |
| Adjustments for: | |||
| Depreciation of property, plant and equipment | 1,162 | 1,006 | 2,139 |
| Amortisation of intangible assets | 2,225 | 2,983 | 5,307 |
| Impairment of Goodwill | 1,535 | - | 43,771 |
| Equity-settled share based payments | 84 | 1,032 | 1,783 |
| Profit on disposal of Telecom and Mobile division | 863 | - | - |
| Profit/(loss) on disposal of property, plant and equipment | - | 3 | 7 |
| Financial assets at fair value through profit or loss | - | 75 | 129 |
| Movements in working capital : | |||
| Increase in inventories | 34 | (1,268) | (1,067) |
| (Increase)/decrease in trade and other receivables | (3,038) | (6,649) | 853 |
| (Decrease)/Increase in trade and other payables | (1,800) | 253 | 195 |
| Decrease/(Increase) in non-current assets | 36 | (112) | 58 |
| Decrease in provisions | (231) | (187) | (424) |
| Foreign exchange gains on operating activities | 100 | (47) | (21) |
| Cash (used in)/generated from operations | (5,025) | (3,426) | 3,034 |
7 Discontinued operations
| Unaudited Six months ended 30 September 2009 | Unaudited Six months ended 30 September 2008 | Audited Year ended 31 March 2009 | ||
| Note | £000 | £000 | £000 | |
| Discontinued operations | ||||
| Revenue | 2 | 25,882 | 39,544 | 74,735 |
| Cost of sales | (21,202) | (31,565) | (63,868) | |
| Gross profit | 4,680 | 7,979 | 10,867 | |
| Selling and distribution costs | (1,870) | (2,538) | (5,211) | |
| Administrative expenses | (2,632) | (4,270) | (28,494) | |
| Exceptional items | - | (181) | (376) | |
| Profit/(Loss) on ordinary activities before taxation | 178 | 990 | (23,214) | |
| Tax on Profit/(loss) on ordinary activities | 248 | - | - | |
| Profit / (loss) for the period (attributable to shareholders of the parent Company) | 426 | 990 | (23,214) | |
| Profit on disposal | ||||
| Proceeds | 16,500 | - | - | |
| Cost of disposal | (1,735) | - | - | |
| Net sales proceeds | 14,765 | - | - | |
| Less: | ||||
| Net assets at disposal | (2,074) | - | - | |
| Goodwill written off | (8,433) | - | - | |
| Intangibles written off | (4,715) | - | - | |
| Deferred tax | 1,320 | |||
| Net assets disposed of | (13,902) | - | - | |
| Profit from disposal of discontinued operations |
863 | - | - | |
| Profit for the year | 1,289 | 990 | (23,214) | |
Telecoms disposal
On 14 August 2009, Redstone announced that it had entered into an agreement to sell its Telecom and Mobile divisions to Daisy Telecoms Limited, a wholly owned subsidiary of Daisy Group plc, for £16.5 million (before costs) in cash. This is after a working capital adjustment which was capped at £500,000. There is a retention fund of £500,000 which will be released within 6 months from completion. The transaction completed on 28 August 2009.
Costs of disposal of £1.74 million relate primarily to professional fees of £1.16 million. Other amounts are internal costs incurred in completion of the disposal.
8 Funding
Bank facilities
In September 2009, the Group agreed an amendment to the terms of its existing debt facilities with Barclays Bank PLC to effect the following changes:
A reduction in the level of commitment available under the senior debt facilities from £30.1 million to £18.0 million;
Revised financial covenants, projections, forecast and budgets within which the Group must operate;
A reduction in ongoing financing costs payable under the senior debt facilities;
Shortening the term of the senior debt facilities by 3 months;
Alteration to the repayment profile of the senior debt facilities to allow more senior term debt to be repaid on final maturity of the senior debt facilities;
Additional monitoring rights over the Group for Barclays Bank PLC;
Further restrictions on payments of dividends or other distributions by the Group;
Intercreditor arrangements between Barclays Bank PLC, SVG and Gartmore as holders of the loan notes;
Tighter restrictions on the Group incurring additional debt;
The total facility now provided by Barclays Bank comprises a £10 million term loan repayable on 30 September 2011 and an £8 million overdraft facility, of which £3.675m had been utilised at the period end. The term loan and overdraft facility are secured on fixed and floating charges over the assets of the Group and the synthetic convertible loan has been cancelled as part of the refinancing;
As at 30 September 2009, arrangement fees of £332,000 are included within borrowings.
Fundraising
In September 2009, the Group completed a fundraising of up to £6 million, through the issue of a convertible loan note to SVG Investment Managers Limited and Gartmore Investment Limited. The agreement also provides for a further £2 million facility, which is uncommitted. The fundraising provides funds for general working capital purposes and to strengthen the Group's balance sheet. The key terms of the loan note are as follows:
The loan note can be converted into shares at a conversion price of 1.32p. This conversion is subject to shareholder approval;
A premium equal to 2 times the outstanding principal amount shall be payable on the maturity date;
The loan note may be issued in tranches on different dates with the initial tranche being an aggregate of £3 million;
The second tranche of up to £3 million can be requested by the Company at any time provided that there has not been a material adverse change;
The maturity date shall be 1 October 2011 or, if earlier, the occurrence of a major transaction;
The loan note is secured on fixed and floating charges over the assets of the Group and ranks behind the Barclays Bank term loan and overdraft facilities;
As at 30 September 2009, arrangement fees of £240,000 are included within borrowings.
Under the Group's accounting policy, the difference between the value of the loan note and the total amount repayable on maturity will be charged evenly to the income statement as a finance cost over the period to maturity dated on 1 October 2011
This arrangement is accounted for under IAS39 with the two elements fair valued together as a compound financial instrument at inception and each balance sheet date. The fair value is recorded as a liability, and as Redstone retain the ability to repay in cash at all times, the movement in fair value is recorded in the income statement. The derivative element of the instrument was valued at £1.50 million on inception and £1.16 million at the period end, with a resulting credit to the income statement. The loan element of the instrument was valued at £1.44 million at inception, and £1.487million at the period end, with a resulting charge to the income statement.
A circular outlining the terms of the loan notes and seeking shareholder approval for a waiver of Rule 9 of the Takeover Code was sent to shareholders on 10 December 2009.
Eckoh Loan
The Group has agreed a standstill agreement with Eckoh regarding the Eckoh Loan the key terms of which are as follows:
£1 million is now repayable on 30 September 2011 and the balance of £1.7 million is repayable on 30 September 2012;
Interest is payable monthly in arrears;
Eckoh has been granted security over the assets of the business which is subordinated to Barclays Bank PLC and the holders of the loan note;
Eckoh will no longer be entitled to convert the Eckoh loan into shares in the Company; and
A fee of £350,000 is payable to Eckoh by the Company of which £125,000 is paid on signature of the agreement and £225,000 is payable on 30 September 2012.
Statement of Directors' Responsibilities
The Directors' confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union.
The Directors of Redstone plc are listed in the Redstone plc Annual Report and Accounts for 31 March 2009.
The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. A copy of the interim results can be found on the Company's website www.redstone.co.uk.
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 financial statements in the interim report for the six months ended 30 September 2009, which comprises the consolidated income statement, consolidated balance sheet, statement of comprehensive income, consolidated statement of changes in equity, consolidated cash flow statement and related notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim report.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules for Companies.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the AIM Rules for Companies and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the interim report for the six months ended 30 September 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules for Companies.
PricewaterhouseCoopers LLP
Chartered Accountants
London
30 December 2009
Advisers
Financial Adviser and Broker
FinnCap, 4 Coleman Street, London, EC2R 5TA
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