Frenkel Topping Regulatory News (FEN)

27 Mar 2008 12:26

Frenkel Topping Group PLC27 March 2008 FRENKEL TOPPING GROUP PLC (the "Group" or the "Company") PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007 Frenkel Topping Limited (Frenkel Topping) is the trading subsidiary of FrenkelTopping Group Plc, Frenkel Topping provides specialist independent financialadvice on the investment of personal injury damages and clinical negligenceawards. Frenkel Topping offers a complete service for all personal injury claimshandlers, lawyers and individual clients, dealing with awards from a fewthousand pounds to multi-million pound cases. Frenkel Topping's expertiseincludes asset protection, bespoke investment portfolios, analysis of periodicalpayments, Court of Protection portfolios and provision and setting up of trusteeand receivership bank accounts. Financial Highlights Year ended 31 Dec Year ended 31 Dec 2007 2006 Revenue £2,757,411 £2,570,504 Gross Profit £1,674,385 £1,400,037Profit/(loss) from operations before share based compensation andprovisions £250,847 £(93,649)Profit/(loss) before taxation £47,134 £(446,641)Cash generated from/(used in) operations £282,532 £(141,310) Operational Highlights • Revenue increased 7% • Gross Profit increased 20% • Profit from operations before share based compensation and provisions increased to £250,847 from loss of £93,649 For further information:- Frenkel Topping Group plc Richard Fraser (Chief Executive) Tel No: 0161 886 8000 W.H. Ireland Limited David Youngman Tel No: 0161 832 2174 CHAIRMAN'S STATEMENT Results This has been an excellent year of progress for the Group. I am pleased toreport that the momentum established during the previous half year to 31December 2006 has been maintained during 2007, resulting in a profit fromoperations before share based compensation and provisions of £250,847 (2006:loss £93,649) and profit before taxation of £47,134 (2006: loss £446,641). Incomparison to last year, revenue has increased by 7% and gross profit hasincreased by 20%. During the year the Group has generated cash from operations of £282,532 (2006:cash absorbed of £141,310). The net asset value of the Group as at 31 December2007 was £4,749,122 (2006: £4,582,142). These significant improvements have occurred as a result of the increase in therecurring income from the Funds in the Investment Management Service (FIMS) andin addition, the focus on revenue generation and cost control implemented acrossall elements of the business by the Board since 2006. As at 31 December 2007the Group's FIMS had increased to £200m. Dividends The Board does not propose a dividend. International Financial Reporting Standards (IFRS) These are the first year's results for the Group to be stated underInternational Financial Reporting Standards (IFRS) and the comparatives havebeen restated on this basis. The date of transition to IFRS for the Group was 1January 2006. The Goodwill in the consolidated balance sheet of the Group isattributable to the acquisition of the trading subsidiaries Frenkel ToppingLimited and Frenkel Topping Structured Settlements Limited. Under IFRS3 thecarrying value of the goodwill is reviewed at each balance sheet date todetermine if the asset has suffered any impairment. Having considered thecarrying value of the goodwill to future revenue streams at the date ofconversion to IFRS the board are satisfied with the carrying value of thegoodwill. Funding During the period the Group entered into a £500,000 loan facility with MBCSettlements Limited (MBC). MBC is a Gibraltar based investment companyoperating in the financial services sector. In consideration of MBC providingthe loan facility, the Group has issued options to MBC in respect of 10,000,000new ordinary shares. The options can be exercised at any time until May 2010provided that the aggregate value of the options exercised does not exceed thetotal of the sums drawn down on the loan facility by the Group. As at 31December 2007, £200,000 has been utilised. The loan will be used for thestrategic developments of the Group. Strategy The Group's strategy remains focussed on developing the Frenkel Topping brand inorder to be recognised as a leading specialist in the field of investingpersonal injury and clinical negligence awards on behalf of the clients. Ourskills prevail in the development of bespoke financial solutions and addingvalue to the professional services offered by the legal community servicing thisparticular field of activity. Our primary focus not only relates to thegeneration of revenue from the initial sale, but also from servicing our clientsas their financial needs develop and change. This has resulted in the increasein FIMS shown year on year and the continued protection of our recurring incomestreams for the future. Directors and employees The Board recognises that its employees are the biggest assets of the Group.The current success of the Group has been achieved as a result of a committedand highly competent team at all levels within the organisation. We seek toretain and reward individuals based on their contribution to the success of thegroup and this objective is demonstrated by each employee having share optionsin the Company once they have completed a year of service. Prospects The Group has commenced 2008 from its strongest financial position to date. TheBoard has set challenging targets for the Executives to achieve and in additionwe seek to increase our recurring revenue streams over future years. The Boardexpects the year to be of continuing progress especially in the area of branddevelopment. We will continue to actively pursue growth opportunities thatwould enhance shareholder value. GROUP INCOME STATEMENT For the year ended 31 December 2007 2007 2006 Notes £ £ REVENUE 3 2,757,411 2,570,504Direct staff costs (1,083,026) (1,170,467) GROSS PROFIT 1,674,385 1,400,037 ADMINISTRATIVE EXPENSES Share based compensation (135,352) (198,301)Provisions - (106,985)Other (1,423,538) (1,493,686) TOTAL ADMINISTRATIVE EXPENSES (1,558,890) (1,798,972) Profit/(loss) from operations before share based compensationand provisions 250,847 (93,649)- provisions - (106,985)- share based compensation (135,352) (198,301) PROFIT/(LOSS) FROM OPERATIONS 115,495 (398,935) Finance costs (68,361) (47,706) PROFIT/(LOSS ) BEFORE TAX 47,134 (446,641)Income tax expense 4 (28,503) (25,039) PROFIT/LOSS)FOR PERIOD 18,631 (471,680) ============ =========== ============ =========== PROFIT/(LOSS) ATTRIBUTABLE TO:Equity holders of parent (15,386) (583,272)Minority Interest 34,017 111,592 18,631 (471,680) ========== ========= ========== =========Loss per ordinary - basic (pence) 5 (0.03)p (1.14)pLoss per ordinary - diluted (pence) 5 (0.03)p (1.14)p ========== ========= ========== ========= The results for the period are derived from continuing activities. GROUP BALANCE SHEETAs ended 31 December 2007 2007 2006 £ £ASSETS NON CURRENT ASSETSGoodwill 5,095,287 5,095,287Property, plant and equipment 51,670 43,648Deferred taxation 35,615 11,106 5,182,572 5,150,041CURRENT ASSETSAccrued income 394,032 329,010Trade receivables 289,925 392,284Other receivables 123,399 101,067Cash 26 29 807,382 822,390 TOTAL ASSETS 5,989,954 5,972,431 ========= ========= ========= =========EQUITY AND LIABILITIESEQUITY Issued capital 273,927 273,927 Share premium account 5,744,864 5,744,864 Share based payment reserve 421,850 286,498 Treasury share reserve (25,000) (25,000) Retained losses (2,222,170) (2,206,784) Other reserve 12,997 - 4,206,468 4,073,505Minority interest 542,654 508,637 TOTAL EQUITY 4,749,122 4,582,142NON CURRENT LIABILITIES Other payables 75,000 105,689 Financial liabilities 194,176 - 269,176 105,689CURRENT LIABILITIES Amounts due to bankers and short term financial liabilities 143,587 473,433 Current taxation 119,025 106,984 Trade and other payables 631,507 579,376 Lease obligations - 9,807 Provisions 77,537 115,000 971,656 1,284,600 TOTAL LIABILITIES 1,240,832 1,390,289 TOTAL EQUITY AND LIABILITIES 5,989,954 5,972,431 ========= ========= ========= ========= GROUP STATEMENT OF CHANGE IN EQUITYFor the year ended 31 December 2007 Share based payment Treasury Profit and reserve share loss account Share Capital Share Premium reserve Other reserve Total Equity £ £ £ £ £ £ £ Balance 1 January2006 227,998 3,586,193 88,197 (25,000) (1,623,512) - 2,253,876Share issue 45,929 2,158,671 - - - - 2,204,600Share basedcompensation - - 198,301 - - - 198,301Loss for theperiod - - - - (583,272) - (583,272) _____________ _____________ _____________ ___________ _____________ _____________ _____________Balance 1 January2007 273,927 5,744,864 286,498 (25,000) (2,206,784) - 4,073,505Share basecompensation - - 135,352 - - - 135,352Loss for theperiod - - - - (15,386) - (15,386)Equity element ofcompoundinstrument - - - - - 12,997 12,997 _____________ _____________ _____________ ___________ _____________ _____________ _____________Balance 31December 2007 273,927 5,744,864 421,850 (25,000) (2,222,170) 12,997 4,206,468 ============= ============= ============= =========== ============= ============= ============= ============= ============= ============= =========== ============= ============= ============= The treasury share reserve represents the cost of 1,067,471 shares held by FTGEBT Trustees Limited, a subsidiary of Frenkel Topping Group Plc. The openmarket value of the shares held at 31 December 2006 was £63,749. The other reserve represents the fair value of the embedded option to convertthe loan instrument into equity. GROUP CASH FLOW STATEMENTFor the year ended 31 December 2007 Year ended Year ended 31 December 31 December 2007 2006 £ £ Profit/(loss) for the year 18,631 (471,680) Adjustments to reconcile profit/(loss) for the year to cash generated/(usedin) from operating activities Tax expense 28,503 25,039Finance cost 68,361 47,706Share based compensation 135,352 198,301 Depreciation 26,920 30,219 Decrease/(increase) in accrued income, trade and other receivable 19,044 (71,551) (Decrease)/increase in trade and other payables (14,279) 100,656 Cash generated/(used in) operations 282,532 (141,310)Taxation (39,605) (18,415) Cash generated from/(used in) operating activities 242,927 (159,725) Investment activities Acquisition of property, plant and equipment (34,942) (5,443) Acquisition of additional shareholding in subsidiary undertaking - (17,030) Cash used in investing activities (34,942) (22,473) Financing Net borrowings 114,668 23,351 Repayment of finance lease (9,807) (4,118) Interest on loans (68,361) (47,705) Cash from/(used in) financing 36,500 (28,472) Increase/(decrease) in cash and cash equivalents 244,485 (210,670) Opening cash and cash equivalents (287,700) (77,030) Closing cash and cash equivalents (43,215) (287,700) =============== =============== =============== =============== 1. GENERAL INFORMATION The preliminary financial information does not constitute full accounts withinthe meaning of section 240 of the Companies Act 1985 but is derived fromaccounts for the years ended 31 December 2007 and 31 December 2006. The figuresfor the year ended 31 December 2007 are audited. The preliminary announcementis prepared on the same basis as set out in the statutory accounts for the yearended 31 December 2007. Those accounts upon which the auditors issued anunqualified opinion, will be delivered to the Registrar of Companies followingthe Annual General Meeting. While the financial information include in this preliminary announcement hasbeen prepared in accordance with the recognition and measurement criteria ofInternational Financial Reporting Standards (IFRS), as adopted by the EuropeanUnion (EU), this announcement does not in itself contain sufficient informationto comply with IFRS's. Frenkel Topping Group Plc is incorporated and domiciled in the United Kingdom. At the date of the authorisation of the financial information the followingstandards and interpretations, which have not been applied in the financialinformation, were in issue but not yet effective: IFRS 7 Financial instruments: Disclosures and the related amendment to IAS 1 on capital disclosures.IFRS 8 Operating segmentsIAS 1 Revised - Capital Disclosures and other changesIFRIC 10 Interim financial reporting and impairmentIFRIC 11 Group and treasury share transactionsIFRIC 12 Service concession arrangementsIFRIC 13 Customer Loyalty ProgrammesIFRIS 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirement and their InteractionIAS 27 Amendment - Consolidated and Separate Financial StatementsIFRS 3 Amendment - Business CombinationsIFRS 2 Amendment - Share-based payment The Directors anticipate that the adoption of these Standards andInterpretations in future periods will have no material impact on the financialinformation when the relevant standards and interpretations come into effect. 2. SIGNIFICANT ACCOUNTING POLICIES The Group's previous financial statements have been prepared under UK GenerallyAccepted Accounting Practice (UK GAAP). However for the financial year ended 31December 2007, the Group has decided to prepare its annual consolidatedfinancial statements in accordance with IFRS as adopted by the European Union(EU) and implemented in the UK. The presentation of financial information under IFRS is governed by IFRS 1. Insome cases this will require the presentation of an item in a differentposition, or the use of a different description in the IFRS income statement orbalance sheet to that adopted in the UK GAAP profit and loss account or balancesheet. These reclassifications have been described in the explanatory notes. An explanation of how the transition from UK GAAP to IFRS has affected theGroup's results and income statement for the year ended 31 December 2006, andthe equity and balance sheets as at 1 January 2006 and 31 December 2006 is setout in note 6. Statutory accounts for the year ended 31 December 2006, which were preparedunder accounting practices generally accepted in the UK, have been filed withthe Registrar of Companies. The auditors' report on those accounts wasunqualified and did not contain any statement under Section 237 (2) or (3) ofthe Companies Act 1985. GOING CONCERN The preliminary announcement is prepared on a going concern basis, which assumesthe Group will continue in operational existence for the foreseeable future. TheGroup's ability to meet its future working capital requirements and thereforecontinue as a going concern is dependent upon it being able to generatesignificant revenues and free cash flow. The directors have preparedprojections which they consider to be prudent and demonstrate that the businesscan operate within its existing cash resources, and have identified a series ofrealistically achievable actions that they are committed to taking to mitigatethe rate of cash outflow should revenues not be secured as predicted. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The preparation of the financial information in conformity with IFRS requiresmanagement to make judgement, estimates and assumptions that affect theapplication of policies and the reported amounts of assets and liabilities,income and expenses. The estimates and associated assumptions are based onhistorical experience and various other factors that are believed to bereasonable under the circumstances, the results which form the basis of makingthe judgements about carrying values of assets and liabilities that are bothreadily apparent from other sources. Actual results may differ from theseestimates. The estimates and underlying assumptions are reviewed on an ongoingbasis. Revisions to accounting estimates are recognised in the period in whichthe estimate is revised if the revision affects only that period or in theperiod of the revision and future periods if the revision affects both currentand future periods. REVENUE Revenue is recorded at the fair value of the consideration, excluding valueadded tax, made during the year from client's contracts. Income is accruedbased on the stage of completion of specific client contracts where the outcomecan be assessed with reasonable certainty and the value for that service hasbeen agreed between the group and the client. GOODWILL Goodwill arising on consolidation represents the excess of the cost ofacquisition over the Group's interest in the fair value of the identifiableassets and liabilities of a subsidiary, associate or jointly controlled entityat the date of acquisition. Goodwill on acquisition of subsidiaries is separately disclosed. Goodwill is recognised as an asset and reviewed for impairment at leastannually. Any impairment is recognised immediately in the income statement andis not subsequently reversed. Goodwill is allocated to cash generating units for the purpose of impairmenttesting. Each of these cash generating units represents the Group's investmentin each country of operation by primary reporting segment. On disposal of a subsidiary, associate or jointly controlled entity, theattributable amount of goodwill is included in the determination of the profitor loss on disposal. Goodwill arising on the acquisitions before the date of transition to IFRS hasbeen retained at the previous UK GAAP amounts subject to being tested forimpairment at that date. Goodwill has been re-stated on transition to IFRS as certain intangible assets,which were not recognised under UK GAAP, have now been separately classified, asthey meet the recognition criteria under IAS 38 for an individual company. No negative goodwill was eliminated on transition to IFRS. IMPAIRMENT At each balance sheet date, the Group reviews the carrying amounts of itsintangibles, property, plant and equipment to determine whether there is anyindication that those assets have suffered an impairment loss. If any suchindication exists, the recoverable amount of the asset is estimated in order todetermine the extent of the impairment loss (if any). Where the asset does notgenerate cash flows that are independent from other assets, the group estimatesthe recoverable amount of the cash-generating unit to which the asset belongs.An intangible asset with an indefinite useful life is tested for impairmentannually and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value inuse. In assessing value in use, the estimated future cash flows are discountedto their present value using a pre-tax discount rate that reflects currentmarket assessments of the time value of money and the risks specific to theasset for which the estimates of future cash flows have been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated tobe less than its carrying amount, the carrying amount of the asset(cash-generating unit) is reduced to its recoverable amount. An impairment lossis recognised as an expense immediately, unless the relevant asset is carried ata revalued amount, in which case the impairment loss is treated as a revaluationdecrease. Where an impairment loss subsequently reverses, the carrying amount of the asset(cash-generating unit) is increased to the revised estimate of its recoverableamount, but so that the increased carrying amount does not exceed the carryingamount that would have been determined had no impairment loss been recognisedfor the asset (cash-generating unit) in prior years. A reversal of an impairmentloss is recognised as income immediately, unless the relevant asset is carriedat a revalued amount, in which case the reversal of the impairment loss istreated as a revaluation increase. PROPERTY, PLANT AND EQUIPMENT All fixed assets are initially recorded at cost. Depreciation is provided at rates calculated to write off the cost less residualvalue of each asset over its expected useful life, as follows: Fixtures & fittings - 25% straight line Leasehold improvements - over the term of the lease Motor vehicles - 25% straight line Computer equipment - 25% straight line EMPLOYEE SHARE OWNERSHIP PLANS The Group operates an Employee Benefit Trust and has de facto control of theshares held by the trust and bears their benefits and risks. The Group recordscertain assets and liabilities of the trust as its own. Finance costs andadministrative expenses are charged as they accrue. FINANCIAL INSTRUMENTS Financial assets and financial liabilities are recognised on the balance sheetwhen the Group has become a party to the contractual provisions of theinstrument. Trade and other receivables Trade receivables are recognised initially at fair value and subsequentlymeasured at amortised cost using effective interest method, less provision forimpairment. A provision for impairment of trade receivables is established whenthere is objective evidence that the Group will not be able to collect allamounts due according to the original terms of receivables. The amount ofprovision is the difference between the asset's carrying amount and the presentvalue of estimated future cash flows, discounted at the effective interest rate. Financial liability Financial liabilities are classified according to the substance of thecontractual arrangements entered into. An instrument will be classified as afinancial liability when there is a contractual obligation to deliver cash oranother financial asset to another enterprise. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand, deposits held atcall with banks and other short-term highly liquid investments with originalmaturities of three months or less, and bank overdrafts. Bank overdrafts areshown within borrowings in current liabilities on the balance sheet. For the purposes of the Cash Flow Statement, cash and cash equivalents consistof cash and cash equivalents as defined above, net of any outstanding bankoverdraft where a right of set off exists. Borrowings Interest-bearing bank loans and overdrafts are initially recorded at fair value,which represents the fair value of the consideration received, net of any issuecosts associated with other borrowings. Borrowings are subsequently stated atamortised cost. Finance charges, including premiums payable on settlement or redemption, areaccounted for on an accrual basis and are added to the carrying amount of theinstrument to the extent that they are not settled in the period in which theyarise. Borrowings are classified as current liabilities unless the Group has anunconditional right to defer settlement of the liability for at least 12 monthsafter the balance sheet date. Convertible loans Convertible loans are regarded as compound instruments, consisting of aliability component and an equity component. At the date of issue, the fairvalue of the liability component is estimated using the prevailing marketinterest rate for similar non-convertible debt. The difference between theproceeds of issue of the convertible loan notes and the fair value assigned tothe liability component, representing the embedded option to convert theliability into equity of the Group, is included in equity. Issue costs are apportioned between the liability and equity components of theconvertible loan notes based on their relative carrying amounts at the date ofissue. The portion relating to the equity component is charged directly againstequity. The interest expense on the liability component is calculated by applying theprevailing market interest rate for similar non-convertible debt to theinstrument. The difference between this amount and the interest paid is added tothe carrying value of the convertible loan note. PROVISIONS Provisions are recognised when the Group has a present obligation as a result ofa past event which it is probable will result in an outflow of economic benefitsthat can be reliably estimated. LEASING Assets held under finance leases are recognised as assets of the Group at theirfair value or, if lower, at the present value of the minimum lease payments,each determined at the inception of the lease. The corresponding liability tothe lessor is included in the balance sheet as a finance lease obligation.Lease payments are apportioned between finance charges and the reduction oflease obligation so as to achieve a constant rate of interest on the remainingbalance of the liability. Finance charges are charged directly against income. Rentals payable under operating leases are charged to income on a straight-linebasis over the term of the relevant lease. EMPLOYEE BENEFITS The Group operates a defined contribution scheme. The pension costs charged inthe financial statements represent the contribution payable by the Group duringthe year. TAXATION The tax expense represents the sum of the current tax expense and deferred taxexpense. The tax currently payable is based on taxable profit for the year. Taxableprofit differs from net profit as reported in the income statement because itexcludes items of income or expense that are taxable or deductible in otheryears and it further excludes items that are never taxable or deductible. TheGroup's liability for current tax is calculated by using tax rates that havebeen enacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amount of assets and liabilities in the financialstatements and the corresponding tax bases used in the computation of taxableprofit, and is accounted for using the balance sheet liability method. Deferredtax liabilities are recognised for all taxable temporary differences anddeferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. Such assets and liabilities are not recognised if the temporarydifference arises from the initial recognition of goodwill or from the initialrecognition (other than in a business combination) of other assets andliabilities in a transaction which affects neither the tax profit nor theaccounting profit. Deferred tax liabilities are recognised for taxable temporary differencesarising on investments in subsidiaries and associates, and interests in jointventures, except where the group is able to control the reversal of thetemporary difference and it is probable that the temporary difference will notreverse in the foreseeable future. Deferred tax is calculated at the tax rates that are expected to apply to theperiod when the asset is realised or the liability is settled based upon taxrates that have been enacted or substantively enacted by the balance sheet date.Deferred tax is charged or credited in the income statement, except when itrelates to items credited or charged directly to equity, in which case thedeferred tax is also dealt with in equity. SHARE-BASED COMPENSATION The group operates an equity-settled, share based compensation plan. The fairvalue of the employee services received in exchange for the grant of options isrecognised as an expense. The total amount to be expensed over the vestingperiod is determined by reference to the fair value of the options granted,excluding the impact of any non-market vesting conditions (for example,profitability and growth targets). Non-market vesting conditions are includedin the assumptions about the number of options that are expected to becomeexercisable. At each balance sheet date, the group revises its estimates of thenumber of options that are expected to become exercisable. It recognises theimpact of the revision of original estimates, if any, in the income statement,and a corresponding adjustment to reserves over the remaining vesting period. The proceeds received net of any attributable transaction costs are credited toshare capital (nominal value) and share premium when the options are exercised. 3. REVENUE The total revenue, profit before tax and net assets are attributable to the oneprincipal activity of the Group, the provision of advice regarding structuredsettlements and related financial services. All revenue and costs originatewithin the United Kingdom. 4. TAXATION 2007 2006 £ £Analysis of charge in yearCurrent taxUK corporation tax 58,627 39,404Adjustments in respect of previous periods (5,615) (10,328) ___________ ___________Total current tax charge 53,012 29,076 ___________ ___________Deferred taxTemporary differences, origination and reversal (24,509) (4,037)Effect of tax rate changing on opening balance - - ___________ ___________Total deferred tax credit (24,509) (4,037) ___________ ___________Tax on profit/(loss) for the period 28,503 25,039 =========== =========== =========== =========== FACTORS AFFECTING TAX CHARGE FOR YEAR The tax assessed for the period is higher than the standard rate of corporationtax in the UK 30% (30%). The differences are explained below: 2007 2006 £ £Profit/(loss) before taxation 47,134 (446,641) ======= ======= ======= =======Profit/(loss) multiplied by standard rate of corporation tax in 14,141 (133,992)the UK of 30% (2006: 30%)Effects of:Expenses not deductible 16,662 6,162Capital allowances for period in excess of depreciation (3,326) 2,170Adjustments to tax charge in respect of previous periods (5,615) (10,328)Unrelieved tax losses and other deductions in period (2,268) 115,993Marginal relief (7,188) (9,287)Short term timing differences 40,606 58,358 ___________ ___________Current tax expense for year 53,012 29,076 =========== =========== =========== =========== 5. LOSS PER SHARE The calculation of basic loss per ordinary share is based on losses of £15,386(2006: £583,272) and on 54,782,947 (2006: 50,956,558) ordinary shares of 0.005peach being the weighted average number of ordinary shares in issue during theperiod. The loss for the period and the weighted average number of ordinary shares forthe purpose of calculating the diluted loss per share are the same as for thebasic loss per share calculation. This is because the outstanding share optionswould have the effect of reducing the loss per ordinary share and wouldtherefore not be dilutive under the terms of IAS 33. 6. EXPLANATION OF THE TRANSITION TO IFRS For all periods up to and including the year ended 31 December 2006 the Groupprepared its financial statements in accordance with United Kingdom GenerallyAccepted Accounting Practices (UK GAAP). In preparing this financial information, the Group has started from an openingbalance sheet as at 1 January 2006, the Group's date of transition to IFRS, andmade those changes in accounting policies and other restatements required byIFRS 1, for the first time adoptions of IFRS. IFRS 1 allows first time adopters certain exemptions from thegeneral requirements to retrospectively apply IFRS as effective for the 31December 2005 year end. The optional exemptions taken by the Group are asfollows: Business Combinations: The Group has elected not to apply IFRS3 Business Combinations retrospectively to business that took place prior to thetransition date. Consequently goodwill arising on business combinations beforetransition date remains at its previous UK GAAP carrying value as at the date oftransition. The reconciliation between UK GAAP and IFRS for the Group's profit/(loss),income statement, balance sheet and total equity are presented below: Reconciliation of loss for year ended 31 December 2006 Year ended 31 December 2006 £ Loss after tax and minority interests under UK GAAP (941,176)Minority interest adjustment (127,938)Amortisation of goodwill 485,842 ___________Loss after tax and minority interest under IFRS (583,272) =========== The principal effects identified on adoption of IFRS are discussed below: Goodwill IFRS 3 'Business Combinations', IAS 36 and IAS 38 resulted in a change to thecarrying values of Goodwill. Until 31 December 2005, goodwill was amortised ona straight line basis over a period of up to 10 years from the year ofacquisition and assessed for an indication of impairment at each balance sheetdate. Under IFRS 3, goodwill is no longer amortised and, instead, is assessed annuallyfor impairment. As a result of this change, the goodwill will be increased by£485,842. Minority Interest Minority interests are presented as part of equity underInternational Accounting Standards whilst under UK GAAP these were disclosedseparately in the Group balance sheet. Losses applicable to minority interestsunder IAS 27 have been allocated against the majority interest, as there is nobinding agreement with the minority to make additional investment to cover thelosses. Reconciliation of income statement for year ended 31 December 2006 IAS 27 Consolidated IFRS 3 UK Financial Business Statements Combinations GAAP IFRS £ £ £ Revenue 2,570,504 - - 2,570,504Cost of Sales (1,170,467) - - (1,170,467) _________ __________ __________ __________Gross Profit 1,400,037 - - 1,400,037 Administration expenses (1,493,686) - - (1,493,686)Share based compensation (198,301) - - (198,301)Amortisation of goodwill (485,842) - 485,842 -Provisions (106,985) - - (106,985) __________ __________ __________ __________Total Administration expenses (2,284,814) - 485,842 (1,798,972) __________ __________ __________ __________ Loss from operations (884,777) - 485,842 (398,935)Finance costs (47,706) - - (47,706) __________ __________ __________ __________ Loss before Taxation (932,483) - 485,842 (446,641)Income tax expense (25,039) - - (25,039) _________ __________ __________ __________ Loss for period (957,522) - 485,842 (471,680)Minority Interests 16,346 (127,938) - (111,592) _________ _________ _________ __________Loss attributable to equityholders of parent (941,176) (127,938) 485,842 (583,272) ============== ============= ============= ============= ============== ============= ============= ============= Reconciliation of equity as at 31 December 2006 31 December 2006 £ Total equity under UK GAAP 4,400,802Amortisation of goodwill 485,842Minority interest (813,139) _________Total equity under IFRS 4,073,505 =========== =========== Reconciliation of balance sheet as 31 December 2006 IAS 27 Consolidated IFRS 3 UK Financial Business Statements Combinations GAAP IFRS £ £ £ £Non current assets Fixtures & Fittings 43,648 - - 43,648Goodwill 4,609,445 - 485,842 5,095,287Deferred tax 11,106 - - 11,106 _________ _________ _________ _________ 4,664,199 - 485,842 5,150,041Current assets Accrued income 329,010 - - 329,010Trade receivables 392,284 - - 392,284Other receivables 101,067 - - 101,067Cash 29 - - 29 _________ _________ _________ _________ 822,390 - - 822,390 _________ _________ _________ _________Total Assets 5,486,589 - 485,842 5,972,431 ============= ============== ============== ============== ============= ============== ============== ============== Equity and Liabilities EquityIssued capital 273,927 - - 273,927Share premium account 5,744,864 - - 5,744,864Share based payment reserve 286,498 - - 286,498Other reserve (25,000) - - (25,000)Retained losses (1,879,487) (813,139) 485,842 (2,206,784) __________ __________ __________ _________ 4,400,802 (813,139) 485,842 4,073,505 Minority interests (304,502) 813,139 - 508,637 Non current liabilities Other liabilities 105,689 - - 105,689 Current liabilities Amounts due to bankers andshort term loans 473,433 - - 473,433Current taxation 106,984 - - 106,984Trade payables and otherpayables 579,376 - - 579,376Lease obligations 9,807 - - 9,807Provisions 115,000 - - 115,000 __________ _________ _________ __________ 1,284,600 - - 1,284,600 __________ _________ _________ __________Total liabilities 1,390,289 - - 1,390,289 __________ _________ _________ __________Total equity and liabilities 5,486,589 - 485,842 5,972,431 ============== ============== ============== ============== ============== ============== ============== ============== Reconciliation of balance sheet as 1 January 2006 (date of transition to IFRS) IAS 27 Consolidated IFRS 3 UK Financial Business Statements Combinations GAAP IFRS £ £ £ £Non current assets Fixtures & Fittings 63,426 - - 63,426Goodwill 2,625,855 - - 2,625,855Deferred tax 5,143 - - 5,143 _________ _________ _________ _________ 2,694,424 - - 2,694,424Current assets Accrued income 330,045 - - 330,045Trade receivables 277,828 - - 277,828Other receivables 146,972 - - 146,972Cash 183 - - 183 _________ _________ _________ _________ 755,028 - - 755,028 _________ _________ _________ _________Total Assets 3,449,452 - - 3,449,452 ============== ============== ============== ============== ============== ============== ============== ============== Equity and Liabilities EquityIssued capital 227,998 - - 227,998Share premium account 3,586,193 - - 3,586,193Share based payment reserve 88,197 - - 88,197Own shares (25,000) - - (25,000)Retained losses (938,314) (685,198) - (1,623,512) __________ __________ __________ __________ 2,939,074 (685,198) - 2,253,876 Minority interests (540,955) 685,198 - 144,243 Non current liabilities Other payables 25,000 - - 25,000 Current liabilities Amounts due to bankers andshort term loans 239,569 - - 239,569Current taxation 101,063 - - 101,063Trade payables and otherpayables 437,803 - - 437,803Lease obligations 13,925 - - 13,925Provisions 233,973 - - 233,973 __________ _________ _________ __________ 1,026,333 - - 1,026,333 __________ _________ _________ __________Total liabilities 1,051,333 - - 1,051,333 __________ _________ _________ __________Total equity and liabilities 3,449,452 - - 3,449,452 ============== ============= ============== ============== ============== ============= ============== ============== 7. BASIS OF THE PRELIMINARY ANNOUNCEMENT The board of directors of Frenkel Topping Group Plc approved the PreliminaryResults on 26 March 2008. The statutory accounts for the year ended 31 December 2007 will be delivered tothe Registrar of Companies following the Annual General Meeting. The statutoryaccounts will be posted to shareholders on 4 April 2008. Further copies will beavailable to the public, free of charge, at the company's registered office, 4thFloor, Statham House, Talbot Road, Old Trafford, Manchester, M32 0FP and theCompany's website at www.frenkeltopping.co.uk The Annual General Meeting will be held on 13 May 2008 at 11 am at AddleshawGoddard LLP, 100 Barbirolli Square, Manchester, M2 3AB. This information is provided by RNS The company news service from the London Stock Exchange