Games Workshop Regulatory News (GAW)

31 Jul 2007 07:01

Games Workshop Group PLC31 July 2007 PRELIMINARY RESULTS Games Workshop Group PLC ("Games Workshop" or the "Group") announces itspreliminary results for the year ended 3 June 2007. Highlights • Revenue at £111.5m (2006: £115.2m)• Pre-exceptional operating profit at £1.9m (2006: £4.2m)• Exceptional items - cost reduction programme £(4.0)m (2006: nil)• Operating (loss)/profit at £(2.1)m (2006: £4.2m)• Pre-tax (loss)/profit at £(2.9)m (2006: £3.7m)• Year end net borrowings of £10.2m (2006: £2.2m)• (Loss)/earnings per share of (11.2)p (2006: 6.5p)• Dividend per share 4.95p (2006: 18.975p) Tom Kirby, chairman and chief executive of Games Workshop, said: "This has been a tough year for Games Workshop. However, as a result of the actions taken by management, the Group is now preparing itself for the future as a leaner and more responsive organisation, better equipped to face the growthchallenges which lie before it. "We are confident that sales will return to growth in the future and we arecontinuing to invest in people and assets to secure that growth; but we are alsoremoving unnecessary costs today and working at preventing their return. "We continue to see Games Workshop as a growth business. We believe that it isonly a matter of time and hard work before we re-establish our historic lineargrowth rate. "There is a steely determination in the business to put things right." For further information, please contact: Games Workshop Group PLC Today only: 01756 770 376Tom Kirby, chairman and chief executive Thereafter: 0115 900 4001Michael Sherwin, finance director 0115 900 4001 The analyst presentation may be viewed at the investor relations website http://investor.games-workshop.com General website www.games-workshop.com Rawlings Financial PR Limited Tel: 01756 770 376Catriona Valentine The 2007 annual report may be viewed at the investor relations website at theaddress above. FINANCIAL HIGHLIGHTS 2007 2006 Revenue £111.5m £115.2m Pre-exceptional operating profit £1.9m £4.2m Exceptional items - cost reduction programme £(4.0)m - Operating (loss)/profit £(2.1)m £4.2m Pre-tax (loss)/profit £(2.9)m £3.7m Year end net borrowings £10.2m £2.2m (Loss)/earnings per share (11.2)p 6.5p Dividend per share 4.95p 18.975p BUSINESS REVIEW BY THE CHAIRMAN AND CHIEF EXECUTIVE Summary of results - for the year to 3 June 2007 This has been a tough year for Games Workshop. However, as a result of theactions taken by management, the Group is now preparing itself for the future asa leaner and more responsive organisation, better equipped to face the growthchallenges which lie before it. Our sales performance over the year has been patchy and difficult to predictaccurately: a poor first quarter was followed by a more encouraging secondquarter; our third quarter was soft, although we finished the year positively.This lack of consistency required us to make two trading statements during theyear as small sales shortfalls created large percentile reductions in profitsdue to the high operational gearing of our business. Management's response tothis has been twofold: firstly, a reinvigorated focus on growing sales, andsecondly, a cost reduction programme to reduce the overhead base of thebusiness. In terms of sales growth, while the overall portfolio shows flat sales for theyear in constant currency, the evidence from our larger and more establishedsales businesses is encouraging. In the UK, which is our most mature salesbusiness, we have seen sales growth for eight out of the last nine months of thefinancial year; the US sales business, which we expect to be a significantengine for future growth, has turned around its sales to independent retailers,which have also been in growth for eight out of the last nine months, and is nowseeing sales growth in our own Games Workshop Hobby stores in its target cities;Australia and New Zealand, our second oldest sales business, has recorded growthin constant currency of 8% in the year. Our overall sales have been held back byour performance in Continental Europe - an area which was enjoying strong growthbetween 2001 and 2004. Management's response to the decline in sales since 2005has led to changes in the management teams in all but one of our ContinentalEuropean territories. These changes are designed to allow better focus on salesdelivery, and to avoid the distractions of back office and infrastructurematters. Our confidence in growth remains: we have continued to open GamesWorkshop stores, adding a net eleven to the portfolio this year. Our efforts to restore the profitability of the business need to focus both onsales and costs. Even though we have set specific and measurable financialtargets for the immediate costs and benefits of the cost reduction programme, wesee this as a long-term process to ensure that the business only incurs thosecosts which are necessary to service our customers properly. In summary, we are confident that sales will return to growth in the future andwe are continuing to invest in people and assets to secure that growth; but weare also removing unnecessary costs today and working at preventing theirreturn. Cost reduction programme In May this year, we announced the acceleration and intensification of ourprogramme of cost reduction to reduce overheads in the business. There are threekey areas of this programme: • Closing loss making stores• Rationalisation of the manufacturing and supply chain• Simplification of the support infrastructure We have identified 32 stores which are unprofitable due to either low sales orhigh rents, and which we see as irremedial. Seventeen of the stores identifiedfor closure are in the Americas, and these are located outside our selectedmetropolitan areas. A further eight are in the UK, six in Continental Europe andone in Asia Pacific. By closing these stores, we are also removing a significantmanagement distraction from our sales businesses. The rationalisation of elements of our manufacturing and supply chain includesthe closure of the tool making facility at Wisbech, UK, which is being relocatedto our main Nottingham site where a new tool room is being established. Inaddition, our Canadian warehouse is being closed and the existing dispatchfacility in Memphis will pick up its workload. A further element of theprogramme is to rationalise inventory management. As automatic inventoryreplenishment is introduced to our UK stores, we will transfer theresponsibility for managing these inventories to our logistics team which alsomanages our warehouse inventory. This will coincide with a review of the storeproduct range. Inventories will be further reduced by introducing just-in-timemanufacturing to our plastics production. A few years ago we established a divisional structure for the business, whichwas organised into four separate management units, each with its own supportinfrastructure. We are simplifying this structure back to one operatingmanagement team, while maintaining the control benefits of the reporting andKPIs that each division had developed. Also, in the sales businesses, we areremoving the cell management structures from our store chains. We believe thatthese changes will create a leaner, flatter and more responsive organisation. Inaddition, we are centralising some support functions (White Dwarf magazine,marketing, IT) further to streamline the customer facing activities and removeunnecessary duplication of back office functions. We have set specific and measurable financial targets for the costs and benefitsof each element of this programme. Estimated Estimated total annualised costs benefits £m £m Closing loss making stores 1.7 1.2Rationalisation of the manufacturing and supply chain 2.3 1.7Simplification of the support infrastructure 2.0 4.1 -------- --------Total 6.0 7.0 -------- -------- £4.0 million of these costs has been recognised as an exceptional item in theseaccounts and the balance will be accounted for in 2008. Dividend We are using the cash which would have otherwise been applied in paying a finaldividend for 2006/7 to finance the cost reduction programme described above. Theboard remains confident in the future growth and profitability of the Group, buthas determined that, until that time, this cash is better used investing in thisprogramme to secure those future profits. Sales by channel The Games Workshop Hobby is supported and promoted by our own Games WorkshopHobby stores, through which 49% of sales are made. As we continue to develop theHobby, we opened 24 and closed 13 stores during the year taking our total at theend of May 2007 to 348. Sales are also made through independent retailers anddirect, via the internet and mail order. An analysis of sales for 2006/7 foreach of the channels is given below: 2007 2006 Independent retailers £44.9m 40% £48.1m 42% Hobby stores £54.5m 49% £54.9m 48% Direct £12.1m 11% £12.2m 10% Sales by territory An analysis of sales for 2006/7 for each of the geographical sectors is givenbelow: Constant Growth/ currency growth/ 2007 2006 (decline) (decline) Continental Europe £45.2m £48.1m -£2.9m -£2.4mUK £34.1m £33.5m +£0.6m +£0.6mThe Americas £24.6m £26.2m -£1.6m +£0.4mAsia Pacific £7.6m £7.4m +£0.2m +£0.6m Continental Europe There are five stand alone sales businesses in Continental Europe, responsiblefor development in France, Germany, Northern Europe, Spain and Italy. At theyear end, we had 114 Games Workshop Hobby stores, up from 106 last year. Oursales have fallen in France, Germany and Spain, but there has been modest growthin Northern Europe and Italy. Most of the decline has been in our sales toindependent retailers, which is the sales channel which enjoyed particularlystrong growth during 2003 and 2004 throughout Continental Europe. We have beenconcerned that our local management teams in Germany and France have been slowto react to the decline in sales since 2005 and have, in addition to the changesmentioned above, appointed our most experienced senior manager as head of salesfor Continental Europe in order to increase the focus on profitable growth. UK At the end of May 2007, we had 118 Games Workshop Hobby stores in the UK (2006:119). After a weak first quarter, the business was in modest growth for the restof the year. In the second half of the year we saw a return to growth in oursales to independent retailers, and our Games Workshop Hobby stores havecontinued to perform satisfactorily. Our focus has remained on staff training,recruitment and retention, particularly for the key posts of store managers. Wecontinued to keep the cost base under close review, reducing both our backoffice costs and the regional management structure for the stores. The Americas During the year, we opened seven and closed eight Games Workshop Hobby stores inthe Americas, which for us comprises the USA and Canada, bringing our total atthe end of May 2007 to 82. We have established that our best model both for thedevelopment of the Hobby and for management command and control is to focus uponselected metropolitan areas where we can cluster our stores to grow and nurturethe Hobby community. Our development plan moving forwards is to recruit staff,bring on middle management and deliver great Games Workshop Hobby activitycentred around this metropolitan area strategy. We have concentrated ourresources on five metropolitan areas, and in these areas our Games WorkshopHobby stores are enjoying growth. Our store programme has continued to shift theemphasis from the more expensive covered shopping mall stores to cheaper andmore flexible strip mall locations. This strategy will also support and developthe independent retailer base in these major metropolitan areas. A keydevelopment this year was the stabilisation of our independent retailer base: inthe USA we began the year with 729 active accounts and we ended it with 821. Oursales to independent retailers were in growth for eight out of the last ninemonths, and for the full year they were flat - the first year without a declinesince 2002. Our plan to close loss making stores during 2007/8 includes 17 stores in theAmericas. The closure of the stores will improve the profitability of thebusiness in the Americas and will also remove a significant burden from thelocal management. Asia Pacific This territory comprises Australia, New Zealand and Japan. At the year end, wehad 34 stores in the whole region (2006: 29). Our operations in Australia andNew Zealand enjoyed a successful year, led by a strong performance from ourGames Workshop Hobby stores. We opened our second and third stores in Japanduring the year and we see this as the beginning of a long-term investment whichcost us £0.5 million this year. The initial indications are promising and we expect to open our fourth store shortly. Other activities Computer games licensing We have in place three third party licences with publishers of computer games:THQ Inc. for Warhammer 40,000, NAMCO BANDAI Games America Inc. for Warhammer andElectronic Arts Inc. (which acquired Mythic Entertainment Inc. during the year)which is developing a massively multiplayer online role-play game set in theWarhammer world. We understand that this online role-play game (WAR - WarhammerOnline: Age of Reckoning) is due to be launched during the first half of the2008 calendar year. We expect licensing income to fluctuate from year to year,depending on the commercial success of the products created by our licensees. BL Publishing Our publishing business, which made sales of £3.1 million this year (2006: £2.6million), continues to develop as a small but profitable niche publishingportfolio, focusing on fantasy and science fiction titles. Sabertooth Games This US based collectible card game business, which has been struggling to breakeven since we acquired it in 2002, has enjoyed significant success this yearwith its Universal Fighting System collectible card game which has begun theturnaround of its fortunes. Sales for the year were $2.3 million (2006 : $1.1million). Workforce This has been a particularly hard year for everybody at Games Workshop. We havelost some dear and old friends; many families are facing the worry and hardshipof redundancy. Nevertheless there is determination and resolve to drive forwardour sales plans and to push through the changes we are making to the cost base.What I find inspiring is the ability our staff are showing, throughout thisperiod of personally disruptive and unsettling structural change, to remainfocused on their jobs. All the stakeholders in Games Workshop should remainproud of the workforce we have all over the world. So once again, I would like to use this annual report to say thank you to allour staff and I trust that our shareholders will join me. Risks facing the business Managing the risks which face our business is what we do every day. Ourmanagement structure and the reporting systems which we have developed make thisprocess transparent and accountable. The head of sales is responsible forkeeping the Games Workshop Hobby fresh and exciting and for managing marketfacing risk; the head of operations is responsible for managing product deliveryrisks; the head of finance is responsible for using our intellectual propertyappropriately, for managing corporate risks and for ensuring we comply with theever waxing (and never waning) regulatory environment. We have a formal riskreporting process as part of our annual budgeting and planning cycle, which islinked into the internal and external audit process, but the management of theserisks is an integral part of the daily management process. Amongst the product delivery risks are those relating to input prices. The costof raw materials, such as metal and plastic, represents no more than 4% of oursales and therefore we do not believe that the price volatility of these inputsrepresents a significant threat to our long-term profitability. In the shortterm our buying team continues to work to minimise these risks and the people inour manufacturing and supply functions continue to seek process efficiencies tooffset any cost impact. Many of our risks are mitigated by the portfolio effect which we enjoy withdifferent geographies, different routes to market and different currencies. Thisleads me to conclude, as it does every year, that the main source of risk tothis business remains management error. This is why management recruitment,development and succession planning are so important. Prospects In the short term our trading prospects remain challenging: as I have indicatedabove, we finished the year positively. Nevertheless, we have yet to establish aconsistent pattern of trading in growth, and our cost reduction programme islikely to cause some further volatility, at least during the first quarter of2007/8. We believe that the business is now returning to growth, but 'callingthe turn' remains difficult. We remain confident, nevertheless, that we are right to refer to these asshort-term trading issues. Our confidence is based upon the following fourfundamentals: 1. The health of the Games Workshop Hobby Despite the short-term difficulties of this year, our internal measures - bothhard and soft - tell us the Hobby is in good health. 2. The long-term growth credentials of the business We continue to see Games Workshop as a growth business. Between 2002 and 2005our sales were above our normal growth line. We believe that it is only a matterof time and hard work before we re-establish our historic linear growth rate. 3. The market opportunity for our existing sales businesses The table below shows our sales per capita in our key sales markets, based uponour 2007 sales and the population statistics for each country. In the long termwe see no reason why we shouldn't achieve similar levels of sales penetration ineach of these markets to those which we currently have in the UK. Achieving thiswould at least treble the current level of our sales. Sales per capita by geographical area UK 51pAsia Pacific 36pContinental Europe 16pThe Americas 9pJapan 0p This is not a sales forecast but a rough indication of the potential sales ofGames Workshop. 4. The capital infrastructure We have come to the end of our investment programme, which leaves the businessseriously well invested. These are the reasons why the directors still believe the prospects for thebusiness remain very good. Tom KirbyChairman and chief executive 30 July 2007 CONSOLIDATED INCOME STATEMENT 53 weeks to 52 weeks to 3 June 2007 28 May 2006 Notes £000 £000 Revenue 3 111,483 115,150Cost of sales (33,697) (34,265) --------- ---------Gross profit 77,786 80,885Operating expenses (81,284) (77,838)Other operating income - royalties receivable 1,423 1,170 --------- ---------Operating (loss)/profit 3 (2,075) 4,217 ------------------------------------------------------------------------------Operating profit - pre-exceptional 1,953 4,217Exceptional items - cost reduction programme (4,028) -------------------------------------------------------------------------------Finance income 326 238Finance costs (1,110) (797) --------- ---------(Loss)/profit before taxation (2,859) 3,658Income tax expense 5 (622) (1,660) --------- ---------(Loss)/profit attributable to equity shareholders (3,481) 1,998 ========= ========= Basic (loss)/earnings per ordinary share (11.2)p 6.5pDiluted (loss)/earnings per ordinary share (11.2)p 6.4p All items dealt with in arriving at (loss)/profit before taxation relate tocontinuing activities. STATEMENT OF RECOGNISED INCOME AND EXPENSE 53 weeks to 52 weeks to 3 June 2007 28 May 2006 £000 £000 (Loss)/profit attributable to equity shareholders (3,481) 1,998 Exchange differences on translation of foreignoperations (614) (131)Cash flow hedges: - fair value gains (88) 86 - transferred to the income statement (86) (331)Net investment hedge - (2)Tax on items recognised directly in equity 52 73 --------- ---------Total recognised (expense)/income for the year (4,217) 1,693 ========= ========= CONSOLIDATED BALANCE SHEET As at As at 3 June 2007 28 May 2006 Notes £000 £000 Non-current assetsGoodwill 2,390 2,449Other intangible assets 4,963 4,320Property, plant and equipment 27,986 29,475Trade and other receivables 1,204 992Deferred income tax assets 2,314 2,121 --------- --------- 38,857 39,357 --------- ---------Current assetsInventories 11,260 12,407Trade and other receivables 8,351 8,801Current tax assets 1,056 382Financial assets - derivative financialinstruments 24 181Cash and cash equivalents 6,103 6,444 --------- --------- 26,794 28,215 --------- ---------Total assets 65,651 67,572 --------- ---------Current liabilitiesFinancial liabilities - borrowings (6,461) (1,705)Financial liabilities - derivative financialinstruments (120) (14)Trade and other payables (13,889) (15,714)Current income tax liabilities (38) (415)Provisions (3,225) (584) --------- --------- (23,733) (18,432) --------- ---------Net current assets 3,061 9,783 --------- ---------Non-current liabilitiesFinancial liabilities - borrowings (9,820) (6,960)Other non-current liabilities (958) (1,317)Provisions (1,283) (927) --------- --------- (12,061) (9,204) --------- ---------Net assets 29,857 39,936 ========= =========Capital and reservesCalled up share capital 7 1,556 1,556Share premium account 7 7,822 7,822Other reserves 7 (1,210) (596)Retained earnings 7 21,689 31,154 --------- ---------Total shareholders' equity 7 29,857 39,936 ========= ========= CONSOLIDATED CASH FLOW STATEMENT 53 weeks to 52 weeks to 3 June 2007 28 May 2006 Notes £000 £000 Cash flows from operating activitiesCash generated from operations 9 10,341 15,789UK corporation tax paid (503) (1,665)Overseas tax paid (1,345) (1,838) --------- ---------Net cash from operating activities 8,493 12,286 --------- ---------Cash flows from investing activitiesPurchases of property, plant and equipment (5,813) (8,321)Proceeds on disposal of property, plant andequipment 13 32Purchases of other intangible assets (951) (830)Expenditure on product development (2,937) (2,505)Interest received 336 234 --------- ---------Net cash from investing activities (9,352) (11,390) --------- ---------Cash flows from financing activitiesProceeds from issue of ordinary share capital - 207Proceeds from borrowings 2,908 1,955Repayment of principal under finance leases (41) (143)Equity dividends paid (5,904) (5,874)Interest paid (1,113) (886) --------- ---------Net cash from financing activities (4,150) (4,741) --------- ---------Effects of foreign exchange rates (107) (5) --------- ---------Net decrease in cash and cash equivalents (5,116) (3,850) ========= =========Opening cash and cash equivalents 4,772 8,622 --------- ---------Closing cash and cash equivalents 8 (344) 4,772 ========= ========= NOTES TO THE PRELIMINARY RESULTS 1. The consolidated financial statements of Games Workshop Group PLC areprepared in accordance with International Financial Reporting Standards (IFRS)and International Financial Reporting Interpretations Committee (IFRIC)interpretations, that are adopted by the European Union and with those parts ofthe Companies Act 1985 applicable to those companies reporting under IFRS. 2. These results for the 53 weeks to 3 June 2007 together with thecorresponding amounts for the 52 weeks to 28 May 2006 are extracts from the 2007annual report and do not constitute statutory accounts within the meaning ofsection 240 of the Companies Act 1985 (as amended). The annual report for the year to 3 June 2007, on which the auditors have issueda report that does not contain a statement under section 237(2) or (3) of theCompanies Act 1985, will be posted to shareholders on 1 August 2007 and will bedelivered to the Registrar of Companies in due course. Copies will also beavailable from Michael Sherwin, Games Workshop Group PLC, Willow Road, Lenton,Nottingham NG7 2WS. This information is also available on the company websiteat http://investor.games-workshop.com. The annual general meeting will be held at Willow Road, Lenton, Nottingham NG72WS at 10.00am on 20 September 2007. The preliminary announcement is prepared in accordance with the Listing Rules ofthe Financial Services Authority and accounting policies consistent with thoseused in the 2006 annual report. The preparation of the consolidated financial statements requires management tomake estimates and assumptions that affect the reported amounts of revenues,expenses, assets and liabilities, and disclosure of contingencies at the balancesheet date. If in future such estimates and assumptions, which are based onmanagement's best judgement at the date of the consolidated financialstatements, deviate from actual circumstances, the original estimates andassumptions will be modified, as appropriate, in the period in which thecircumstances change. The following areas are considered of greater complexityand/or particularly subject to the exercise of judgement: • Management estimates and judgements are required in assessing the impairment of assets, particularly in relation to the forecasting of future cash flows and the discount rate applied to the cash flows. • Judgement is involved in assessing the exposures in provisions and hence in setting the level of the required provisions. 3. Segmental analysis The Group has one business segment, the Games Workshop Hobby. Geographicalsegments represent the dominant source and nature of the Group's risk andreturns and is therefore provided below as the primary reporting format. 53 weeks ended 3 June 2007 Rest Central/ Continental United The Asia of the un- Design and Royalty Europe Kingdom Americas Pacific World allocated development income Group £000 £000 £000 £000 £000 £000 £000 £000 £000Total gross segment salesby operation 45,221 34,104 24,540 7,618 - - - - 111,483Inter-segment sales 554 (3,356) 2,100 502 200 - - - - -------- ------- ------- ------- ------- -------- -------- ------ -------Total gross segment salesby location of customers 45,775 30,748 26,640 8,120 200 - - - 111,483 ======== ======= ======= ======= ======= ======== ======== ====== =======Pre-exceptional operatingprofit/segment result bylocation of customers 5,408 4,032 (137) 32 84 (4,958) (3,931) 1,423 1,953Exceptional items (800) (2,084) (1,120) (24) - - - - (4,028) -------- ------- ------ ------ ------ -------- -------- ------ -------Operating profit/segmentresult by location ofcustomers 4,608 1,948 (1,257) 8 84 (4,958) (3,931) 1,423 (2,075) ======== ======= ======= ======= ======= ======== ======== ====== ======= 52 weeks ended 28 May 2006 Rest Central/ Continental United The Asia of the un- Design and Royalty Europe Kingdom Americas Pacific World allocated development income Group £000 £000 £000 £000 £000 £000 £000 £000 £000 Total gross segment salesby operation 48,112 33,507 26,121 7,410 - - - - 115,150Inter-segment sales 1,348 (3,489) 1,645 444 52 - - - - -------- ------- ------ ------ ------ -------- -------- ------ -------Total gross segment salesby location of customers 49,460 30,018 27,766 7,854 52 - - - 115,150 ======== ======= ======= ======= ======= ======== ======== ====== =======Operating profit/segmentresult by location of customers 8,154 3,799 (487) 470 22 (4,872) (4,039) 1,170 4,217 ======== ======= ======= ======= ======= ======== ======== ====== ======= 4. The calculation of basic (loss)/earnings per ordinary share has been based on(loss)/profit attributable to equity shareholders of £(3.5) million (2006: £2.0million) and the weighted average number of shares in issue throughout the year. The calculation of diluted earnings per ordinary share has been based on (loss)/profit for the year and the weighted average number of shares in issuethroughout the year, adjusted for the dilution effect of share optionsoutstanding at the year end. There is no impact on the diluted EPS for the 53weeks ended 3 June 2007 for the share options in existence as, due to losses, these options are anti-dilutive. 2007 2006Weighted average number of shares (thousands):For basic (loss)/earnings per ordinary share 31,116 30,959Dilution effect of share options outstanding - 47 ------- -------For diluted (loss)/earnings per ordinary share 31,116 31,006 ======= ======= 5. Income tax expense 2007 2006 £000 £000Current taxationUK corporation tax 50 530Overseas tax 748 1,072 -------- --------Total current taxation 798 1,602Deferred taxation (176) 58 -------- --------Income tax expense 622 1,660 ======== ======== 2007 2006 £000 £000 (Loss)/profit before taxation (2,859) 3,658 ------- --------(Loss)/profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 30% (858) 1,097 ------- --------Effects of:Expenses not deductible for tax purposes 393 274Movement in deferred tax not recognised 1,282 677Higher rates on overseas earnings (60) 26Adjustments to tax charge in respect of previous years (135) (414) ------- --------Total tax charge for the year 622 1,660 ======= ======== 6. No final dividend is proposed. The dividends paid in the year were£5,904,000 (18.975p per share). 7. Consolidated statement of changes in shareholders' equity Other reserves Retained earnings --------------------------------- --------------------------- Called up Share Capital Profit share premium redemption Translation Other Hedging Treasury and Total capital account reserve reserve reserve reserve shares loss equity £000 £000 £000 £000 £000 £000 £000 £000 £000 As at 28 May 2006 1,556 7,822 101 353 (1,050) 60 (49) 31,143 39,936Exchange adjustments - - - (614) - - - - (614)Loss attributable to equity shareholders - - - - - - - (3,481) (3,481)Dividends paid - - - - - - - (5,904) (5,904)Share-based payments - - - - - - - 42 42Deferred tax - - - - - 26 - - 26Current tax - - - - - 26 - - 26Cash flow hedges:- fair value losses in the year - - - - - (88) - - (88)- transfers to net profit - - - - - (86) - - (86) ------- ------ ------- --------- ------ -------- ------- ------- -------As at 3 June 2007 1,556 7,822 101 (261) (1,050) (62) (49) 21,800 29,857 ======= ====== ======= ========= ====== ======== ======= ======= ======= Other reserves Retained earnings --------------------------------- --------------------------- Called up Share Capital Profit share premium redemption Translation Other Hedging Treasury and Total capital account reserve reserve reserve reserve shares loss equity £000 £000 £000 £000 £000 £000 £000 £000 £000 As at 29 May 2005 1,553 7,592 101 486 (1,050) 232 (1,132) 35,960 43,742Exchange adjustments - - - (131) - - - - (131)Profit attributable to equity shareholders - - - - - - - 1,998 1,998Shares vested - - - - - - 1,083 (1,083) -Dividends paid - - - - - - - (5,874) (5,874)Share-based payments - - - - - - - 168 168Current tax - - - - - 73 - - 73Cash flow hedges:- fair value gains in the year - - - - - 86 - - 86- transfers to net profit - - - - - (331) - - (331)Net investment hedge - - - (2) - - - - (2)Issue of ordinary sharecapital 3 230 - - - - - (26) 207 ------- ------ ------- --------- ------ -------- ------- ------- -------As at 28 May 2006 1,556 7,822 101 353 (1,050) 60 (49) 31,143 39,936 ======= ====== ======= ========= ====== ======== ======= ======= ======= 8. Analysis of net debt As at As at 28 May Cash Non-cash Exchange 3 June 2006 flow changes movement 2007 £000 £000 £000 £000 £000 Cash at bank and in hand 6,444 (229) - (112) 6,103Current borrowings - bankoverdraft (1,672) (4,780) - 5 (6,447) ------- ------- -------- -------- -------Cash and cash equivalents 4,772 (5,009) - (107) (344) Non-current borrowings (6,955) (2,908) - 52 (9,811)Finance leases (38) - (28) 2 (23) ------- ------- -------- -------- --------Net debt (2,221) (7,876) (28) (53) (10,178) ======= ======= ======== ======== ======== 9. Reconciliation of (loss)/profit to net cash from operations 2007 2006 £000 £000 (Loss)/profit attributable to equity shareholders (3,481) 1,998Income tax expense 622 1,660Depreciation of property, plant and equipment 6,925 7,145Impairment loss on property, plant and equipment 306 -Loss on disposal of property, plant and equipment 95 113Amortisation of capitalised development costs 2,525 2,289Amortisation of other intangibles 720 736Finance income (326) (238)Finance costs 1,168 908Net fair value (gains)/losses on derivative financialinstruments 88 (43)Share-based payments 42 168Exchange gains on borrowings (58) (111)Changes in working capital:Decrease in inventories 901 465Decrease in trade and other receivables 128 948Decrease in trade and other payables (2,326) (562)Increase in provisions 3,012 313 --------- ---------Net cash from operating activities 10,341 15,789 ========= ========= This information is provided by RNS The company news service from the London Stock Exchange