IDH.L Regulatory News (IDH)

16 Jul 2007 07:01

Immunodiagnostic Systems Hldgs PLC16 July 2007 PRELIMINARY RESULTS For the year ended 31 March 2007 Immunodiagnostic Systems Holdings plc ("IDS" or the "Company"), a leadingproducer of diagnostic testing kits for the clinical and research markets,announces unaudited preliminary results for the year ended 31 March 2007, a yearof continued and sustained progress for the Company. IDS operates in the in-vitro diagnostics ("IVD") market. The Company designs,manufactures and sells immunoassay kits which are used to measure or detectparticular substances within a sample, thus aiding the diagnosis or monitoringof a disease or providing information for research studies. In 2002 theimmunoassay sector of the IVD market was estimated to be worth US$ 3.9bn. Financial Highlights • Turnover up 22% to £9.9m (2006: £8.1m) • Operating Profit up 97% to £2.21m (2006: £1.12m) • Pre-tax profit up 109% to £2.19m (2006: £1.05m) • Net cash of £875,000 • Dividend of 1.25p (2006: 1p) Operational Highlights • Addition of new products through development, collaboration and acquisition • Further expansion of direct distribution network • Exclusive agreement to develop and market Bone & Skeletal products for Biocode-Hycel's 3X3 instrument • Proposed acquisition of Nordic Bioscience Diagnostics A/S for £17m • Strengthening of the Board Regarding Outlook, David Evans, Chairman, said: "Trading in the current year is ahead of last year and in line with managementexpectations. "On July 4th the Board announced the conditional (upon finalising bank finance)acquisition of Nordic Bioscience Diagnostics for a total consideration of £17m.The company will also be paying a royalty on the automated versions of theproducts being acquired. "The acquisition, if completed, will be in itself earnings enhancing and givethe group a significant and some may argue, a dominant position in this marketsegment. "The key to establishing further dominance and profitability is though,dependent upon the ability of the group to automate its key products on the 3 x3. This remains the group's highest priority and the group is currentlyevaluating ways in which this opportunity can be maximised." Contacts:IDS Parkgreen Communications LtdDavid Evans, Roger Duggan, Paul McManusChairman Managing Director Tel: 020 7479 7933Tel: 07740 084 452 Mob: 07775 845 511 Mob: 07980 541 893http://www.ids-direct.com About the Company • IDS, based in Boldon, Tyne & Wear, is a world leader in the area ofdiagnostic tests for the clinical and research markets, currently focusing onimmunoassays used in the area of bone disease (e.g. Vitamin D and bone formation/loss markers). • Immunoassays measure or detect biomarkers whose presence orconcentration are indicative of a disease state. By exploiting proteomics andrecombinant antibody, IDS will deliver accelerated identification anddevelopment of new disease-related biomarkers. IDS is one of the first companiesto adopt this approach in the IVD market. • The Group's innovative work in the development of a vitamin Dimmunoassay enabled it to win a Queen's Award for Technological Achievement in1999 and in 2006 IDS won the Queen's Award for Enterprise: International Trade. • The Company manufactures its own tests and distributes these, alongwith other manufacturers' tests, directly in the UK, Germany (one of Europe'slargest markets), France and the US, and through third party distributors inother territories. In June 2003 IDS Inc was established; in December 2004 theGerman subsidiary IDS GmbH; and in October 2005 IDS Eurl in France. • The Company has a profitable core business and has grown consistentlyin turnover since a management buy-out ("MBO") in 1996. • IDS floated on AIM in December 2004 raising £1.12m net funds withshares placed at 51p. Chairman's Statement I have pleasure in reporting on a year of continued and sustained progress atImmunodiagnostics Systems (IDS) Results Turnover in the year grew to £9.9m (2006: £8.1m) an increase of 22% with growthbeing achieved in all territories. Particularly pleasing was the contributionfrom our French subsidiary which was only established in October 2005. Operating Profit increased to £2.21m (2006: £1.12m) an increase of 97%reflecting the benefits of operational gearing within the group together withthe beneficial effect of two non-recurring income items in relation to productdevelopment which contributed £242,026 set against that is the impact of FRS20. Profit before tax amounted to £2.19m (2006: £1.05m) an increase of 109%. The charge to Corporation Tax amounted to £597,000 (2006: £220,000) resulting ina profit after tax of £1.59m (2006: £829,000) an increase of 92%. The dividend last financial year was 1p and the Board are happy to announce anincrease in the dividend for this financial year to 1.25p. Strategic Direction The Board has, since the last report, sought to consolidate its leading positionin its market segment of bone and mineral disease through: • The addition of new products through development, collaboration and by acquisition • Selectively adding to its direct marketing channel as exemplified by the establishment of its French subsidiary, with active consideration being given to the establishment of a direct sales organisation in Scandinavia. • Addressing the issue of automation through the 3 x 3 strategic collaboration with Biocode. Management During the year the Board has been strengthened through the elevation of TonyWilks (a Group Sales & Marketing Director) and Martha Garrity (TechnicalDirector) who replaced Dr Phil Lee who resigned last May. Additionally the Board is actively looking to recruit as a main board position,an Operations Director, and I look forward to updating you in due course on thisappointment. Outlook Trading in the current year is ahead of last year and in line with managementexpectations. On July 4th the Board announced the conditional (upon finalising bank finance)acquisition of Nordic Bioscience Diagnostics for a total consideration of £17m.The company will also be paying a royalty on the automated versions of theproducts being acquired. The acquisition, if completed, will be in itself earnings enhancing and give thegroup a significant and some may argue, a dominant position in this marketsegment. The key to establishing further dominance and profitability is though, dependentupon the ability of the group to automate its key products on the 3 x 3. Thisremains the group's highest priority and the group is currently evaluating waysin which this opportunity can be maximised. Finally I would like to thank both the employees of IDS, whose unstinting efforthas made this past year such a positive one, and to you and as a shareholder foryour continued support. David Evans Non-Executive Chairman 15 July 2007 MANAGING DIRECTOR'S REVIEW The Financial Year to 31st March 2007 was a year of highly satisfactorysustained organic growth in every aspect of our existing business, both at homein the UK and throughout our subsidiaries in the USA, Germany, France andFinland. More importantly, it was a year of detailed strategic planning andtactical preparation, taking important decisions and thereafter putting in placean infrastructure to achieve these goals. Longer term planning led us toidentify and negotiate contractual agreements with third-parties, and theirsuccessful conclusion will provide for stepwise growth in the near future. One exceptional event in the last year was the demise of a major globalcompetitor, Nichols Institute Diagnostics of California. This has providedopportunity for IDS (and others) to gain sales in a significant if temporarilychaotic market. Our three-pronged strategy, as stated in my report of last year, remains aspertinent today as then, and is, I believe, providing the immediate challengeswe need as a cogent, responsive and market-focussed organisation, andencompasses the more aspirational, forward-looking vision we share as a company.The strategy remains: • To drive geographic market growth, increasing direct sales and those achieved through our Distributor network • To accelerate New Product Development, and • To embrace growth by acquisition, of products and/or companies. The year, we have benefited from a maturation and further market acceptance ofour subsidiaries, IDS Inc (in Fountain Hills, Phoenix, AZ, USA), IDS GmbH (inFrankfurt, Germany) and IDS Eurl (in Paris, France). 'Market acceptance' isperhaps not a clearly defined term, but has significant connotations for IDS.We have, for example, exhibited our market-leading products at the AACC(American Association for Clinical Chemistry) convention for many years (1990onwards), and received enthusiastic responses from US researchers andclinicians, but little in the way of resultant sales. The establishment of IDSInc, in Phoenix, Arizona in 2003, changed this dramatically - US customersprefer to buy from US operations, free from import/currency/culturalcomplications. Sales have blossomed as a result. Whilst trans-national shipments within the EU are easier, we are experiencingsimilar uplifts in Germany and France - the comfort of buying from a domesticprovider, sharing language and culture, is a highly significant factor in itsown right, and a lesson that we will learn from in the future. During this year, Tony Wilks joined the main Board as Sales and MarketingDirector, and moved from IDS GmbH in Frankfurt to Newcastle upon Tyne. We arefortunate that we found an excellent successor in Dr Rudolf Schemer to take overas Country Manager at IDS GmbH. Like Tony, Rudolf is ex-Nichols InstituteDiagnostics, and therefore has extremely pertinent knowledge of the industry andthe European market. He is also a technical specialist with extensive knowledgeof the insulin-like growth factors and their binding proteins, a targetedexpansion area for new product development at IDS. I anticipate that the benefits of direct representation by our subsidiaries willgrow, and be further enhanced by a still more comprehensive product line, towhich I will return below. We have enjoyed a continuing improvement in performance of our Distributors invarious territories throughout the world. This has been achieved by increasedsupport from Boldon HQ and in-field support, with additional training andmaterials available to every distributor. Regulatory hurdles are frequentlyfrustrating, but product registration activities continue in Japan, China and anumber of other territories, and in the fullness of time will be overcome. Our sales for the year have benefited to a certain degree by the withdrawal ofNichols Institute Diagnostics (NID) from the market in May/June 2006. NID was asignificant competitor, with an automated instrument offering a number ofcompeting tests, and they enjoyed a significant market share. We anticipatemaking further inroads into ex-NID customers as we roll-out our automationprogramme. To date, IDS products have been designed for use by skilled technicians withinthe laboratory environment (i.e. manual assays). In the course of the last year,we have enabled automation of our best-selling products on 'Open System'instruments such as the Triturus (from Grifols, Spain), with considerablesuccess. However, in July 2006, we entered into discussion with Biocode Hycel of Belgium(BCH) with a view to obtaining rights to a new, automated immunoanalyser knownas the 3X3. With the successful conclusion of these negotiations, IDS acquiredexclusive global rights to develop and market Bone & Skeletal products for the3X3 instrument, and also became a founder member of what will become an "Alliance" of IVD companies. The power of this concept is that companiesexcelling in non-competing areas will each apply their expertise to developingproducts for the 3X3, thereby accelerating 'menu development', an all-importantfactor in placing instruments in customers' laboratories in the face of stiffcompetition. We look forward to entering into the fully-automated 'Closed System' specialistimmunoassay market with our leading products. A Closed System ensures thatend-users must use reagent sets that are instrument-specific, produced only byIDS (or another member of the Alliance), which provides for more consistentresults between laboratories and generates stronger customer loyalty. With ourunique product offering, IDS will be in an excellent position to take apredominant market position in the important area of diagnosing and monitoringtherapy in patients with osteoporosis and other bone diseases. Withfully-automated instrumentation, we will also be able to compete moreeffectively for the larger accounts in reference laboratories and CRO's. In February this year, we appointed a new Technical Director, Dr Martha Garrity,who joined us from California. For the previous 11 years, Martha had beendeveloping immunoassays for the automatic analyser at Nichols InstituteDiagnostics, and therefore has the ideal background to take us into productdevelopment for the 3X3. The technologies employed are essentially identical(paramagnetic particles and acridinium chemiluminescence, for the technicallyminded), and she has tremendous insight into the pot-holes we will encounter onthe way - having navigated them before! Vitamin D measurement remains a jewel in the crown of IDS, conferredpredominantly by our current technology out-performing competing methods inefficiency and simplicity of use. We are now prioritizing the development(conversion) of existing IDS products to the automated 3X3 platform, and our twomain Vitamin D technologies are high on the priority list. However, we also have a parallel New Product Development programme that will addstill more Bone & Skeletal biomarkers to the menu. An antibody licenceagreement with Immutopics of San Clemente, California, signed last December,will provide the key raw materials to develop products for Intact ParathyroidHormone (I-PTH) and the newer, increasingly respected BioActive PTH. Morerecently, we reached an agreement with VitaK of Maastricht to develop a MatrixGLA protein, which is a factor active in calcification of tissues, and may haveapplications in vascular disease. And, a little icing on the cake, we have secured a contract with one of the topEuropean pharmaceutical giants, hopefully the first of several, to develop andmanufacture an automated 3X3 test for a proprietary compound for their extensiveforward clinical trials. IDS continues to conduct the feasibility stage of R&D at SBA Sciences in Oulu,Finland, which is now managed by Dr Jussi Halleen, also of Pharmatest of Turku.Several programmes are underway in Oulu, and we have recently recruited afurther scientist, Dr Hannele Ylipahkala to accelerate progress. In Boldon, we have opened a spacious kitchen/dining/lounge area for our staff,and commissioned an audio-visual presentation suite and numerous additionaloffices. Happily, these were ready in time to host a royal visitor in December,when we were selected for a visit by the Duke of York, Prince Andrew, during avisit to the north-east in his capacity as the UK's Special Representative forInternational Trade. This proved to be a constructive visit, with HRH providingsome novel suggestions on how to break into new international markets. FY 2006/7 was a demanding and rewarding year, with sound progress made on allfronts, and ambitious plans laid for future growth. Now well into FY 2007/8, weare able to see the first fruits of our labours, and I am confident that whenreflecting on our achievements in one year's time, I will have a still moreexciting year to draw upon, and be able to report significant additionalshareholder value. Roger Duggan Managing Director 15 July 2007 FINANCIAL REVIEW Financial Highlights This year IDS achieved record financial results and again exceeded marketexpectations, with increased revenues and profits from our core products. Turnover Turnover increased by 22% to £9,922,000 (2006: £8,133,000). Direct sales intothe USA, Germany, France and strong domestic demand contributed significantly tothis year's growth. Gross Margin Our gross margin increased to 65.53% (gross profit £6,502,000) from 61.29% in2006 (gross profit £4,985,000.) This increase reflects certain economies ofscale within production as well as the change in product mix within our businesswith sales of IDS manufactured product up by 21% and sales in distribution ofthird party products up by 25% compared to last year. There was also anadjustment of £263,000 restating cost of sales for 2006. Operating Costs and Profits We continue to invest in R&D however our spend in 2007 decreased to £692,000from £811,000 - a decrease of 14.7% as we reduced some of our external projectsand experienced a favourable variance in staff mix. However, we expect R&Dexpenditure to increase throughout 2008 as we look to bring additional newproducts to market and automate some of our manual assays. Distribution and Administrative expenses increased by £566,000 to £4,422,000compared to £3,856,000 in 2006. This increase was expected as we strengthenedour overseas subsidiaries and expanded our support network for increased sales. The charge for depreciation and amortisation of intangibles, including goodwillwas £262,000 compared to £291,000 in 2006. EBITDA The group reports an increase in earnings before interest, tax, depreciation andamortisation (EBITDA) from £1,412,000 in 2006 to £2,474,000, an increase of 75%. Turnover by Product Area Year ending 31st March: 2007 2006 Change £'000 £'000 % Vitamin D 5,358 4,059 32.00Octeia 774 535 44.67SBA - Trap 642 846 (24.11)Gamma B 182 228 (20.18)Other 290 318 (8.81)Total of IDS Products 7,246 5,986 21.05 Distribution of third party 2,676 2,147 24.64sales Total Turnover 9,922 8,133 22% Cash Flow The company's continued improvement at generating cash has once again providedresource to help grow the business: Net cash flow from operating activities was 2,136,000Net of investments and servicing finance (20,000)Taxation (428,000)Capital expenditure etc. (791,000)Dividend (133,000)Financing (689,000) This has led to an increase in cash of £75,000 and a net cash position of£875,000 as at 31st March 2007. Dividend Policy and Dividend The board is proposing a dividend for the year of 1.25p (2006: 1p); subject tothe approval of shareholders in the Annual General Meeting, the dividend pershare will be on 26 September 2007 to shareholders on the register at the closeof business on 29 August 2007. Balance Sheet The Group's fixed assets at 31st March 2007 were £2,531,000 (2006: £1,842,000),which consisted of tangible assets of £1,137,000, intangible assets of£1,392,000 and investments of £2,000. The intangible assets principally relateto the patents and goodwill acquired on acquisitions. Stocks have increased to £915,000 (2006: £805,000) and debtors have increased to£2,108,000 (2006: £1,563,000) while current creditors have increased to£1,990,000 (2006: £1,664,000). Creditors due after one year have decreased to£16,000 (2006: £441,000). Financial Performance This report shows the Group has had a very good year with record sales andprofitability, a major contributor to this success has been the increase in boththe number of orders received and the number of active customers that purchaseproduct. As we develop and introduce new products we expect this growth tocontinue. There are of course always risks associated with a business and as the in-vitrodiagnostic market develops there is the possibility that increasing competitionfrom larger companies with greater financial and other resources than thosedirectly available to the Group will appear. The directors are aware of this andare looking to work closely with these larger companies in an attempt to makethem customers for the Group's products rather than direct competitors. Our progress on our strategic objectives is monitored by the board of directorsby reference to 6 key performance indicators applied on a Group wide basis. TheGroups performance for 2007 and 2006 is shown in the table below: Financial KPI 2007 2006 VarianceAnnual increase in sales: 22% 50% (28)%Number of net invoices issued 8,898 7,157 1,741Gross margin 65.53% 61.29% 4.24%Profit after tax 16.05% 10.19% 5.86%Basic earnings per share 11.933p 6.212p 5.721pDiluted earnings per share 10.917p 5.977p 4.94pROCE* 49.37% 35.98% 13.39% *ROCE being profit before tax as a % of shareholders funds Paul HailesFinance Director15 July 2007 CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 31 March 2007 Unaudited 2007 2006 £ £ (restated) TURNOVER 9,922,427 8,132,681 --------- --------- 9,922,427 8,132,681 Cost of sales (3,420,075)(3,147,941) --------- ---------Gross profit 6,502,352 4,984,740 Distribution costs (1,540,068)(1,444,004)Administrative expenses (2,882,008)(2,411,748)Other operating income 127,486 - --------- --------- 2,207,762 1,128,988Share of operating profit / (loss) in associates 1,226 (11,657) --------- ---------OPERATING PROFIT 2,208,988 1,117,331 Interest receivable 19,100 14,806Share of interest receivable in associates 156 181 --------- --------- 2,228,244 1,132,318 Interest payable and similar charges (39,238) (83,758) --------- -----PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 2,189,006 1,048,560 Taxation (596,577) (219,565) --------- ---------PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 1,592,429 828,995 ========== ========= EARNINGS PER SHARE Basic 11.933p 6.212pDiluted 10.917p 5.977p All transactions arise from continuing operations. STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESFor the year ended 31 March 2007 Unaudited 2007 2006 £ £ (restated) Profit for the financial year 1,592,429 828,995Foreign exchange translation differences on foreign (11,421) (9,606)currency net investment in subsidiaries --------- ----- Total recognised gains and losses relating to the year 1,581,008 819,389Prior Year adjustment (note 6) (108,080) ======= ---------- Total recognised gains and losses since the last 1,472,928 financial statements ========== CONSOLIDATED BALANCE SHEETAs at 31 March 2007 Unaudited 2007 2006 £ £ (restated) FIXED ASSETSIntangible assets 1,392,468 1,093,719Tangible assets 1,136,701 746,429Investments 1,897 1,769 ------------------- ------------------- 2,531,066 1,841,917 ------------------- ------------------- CURRENT ASSETSStocks 914,640 805,203Debtors due within one year 2,107,859 1,562,693Cash at bank and in hand 959,842 885,094 ------------------- ------------------- 3,982,341 3,252,990CREDITORS Amounts falling due within one year (1,989,957) (1,663,737) ------------------- -------------------NET CURRENT ASSETS 1,992,384 1,589,253 ------------------- -------------------TOTAL ASSETS LESS CURRENT LIABILITIES 4,523,450 3,431,170 CREDITORS Amounts falling due after more than one year (15,521) (440,984) ------------------- ------------------- 4,507,929 2,990,186 PROVISIONS FOR LIABILITIES AND CHARGESDeferred Tax 15,094 12,403Other provisions 27,140 27,020Share of associates net liabilities 11,015 12,270Deferred income 20,378 24,317 ------------------- ------------------- 4,434,302 2,914,176 =================== =================== CAPITAL AND RESERVESCalled up share capital 266,913 266,913Share premium account 935,681 935,681Other reserves 814,358 737,528Profit and loss account 2,423,885 976,324 ------------------- ------------------- 4,440,837 2,916,446Own shares (6,535) (2,270) ------------------- -------------------SHAREHOLDERS' FUNDS 4,434,302 2,914,176 =================== =================== CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 March 2007 Unaudited 2007 2006 £ £ Net cash flow from operating activities 2,136,014 1,215,881 Returns on investments and servicing of (20,138) (68,952)finance Taxation (428,328) (127,889) Capital expenditure and financial investment (790,613) (291,402) Equity Dividend Paid (133,447) - --------- ---------CASH INFLOW BEFORE FINANCING 763,488 727,638 Financing (688,740) (286,655) --------- ---------INCREASE IN CASH IN THE YEAR 74,748 440,983 ========= ========= RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/(DEBT) Unaudited 2007 2006 £ £Increase in cash in the year 74,748 440,983 Net cash outflow from bank loans 589,906 195,385Cash outflow in respect of hire purchase 98,834 60,994 --------- ---------CHANGE IN NET DEBT RESULTING FROM CASH FLOWS 763,488 697,362 New hire purchase (57,929) (170,422) --------- --------- MOVEMENT IN NET FUNDS IN THE YEAR 705,559 526,940 ========= ========= NET FUNDS/(DEBT) AT 1 APRIL 2006 169,479 (357,461) --------- ---------NET FUNDS AT 31 MARCH 2007 875,038 169,479 ========= ========= NOTES TO THE FINANCIAL STATEMENTSFor the Year Ended 31 March 2007 1. BASIS OF PREPARATION The financial information set out in this announcement does not constitute theCompany's statutory accounts for the years ended 31 March 2007 or 2006. Thefinancial information for the year ended 31 March 2006 is derived from theImmunodiagnostic Systems Holdings Plc statutory financial statements for theyear ended 31 March 2006 which have been delivered to the Registrar ofCompanies. The auditors reported on those financial statements; their report wasunqualified and did not contain a statement under s237 (2) or (3) Companies Act1985. The statutory financial statements for the year ended 31 March 2007 willbe finalised on the basis of the financial information presented by thedirectors in this preliminary announcement and will be delivered to theRegistrar of Companies following the Company's Annual General Meeting. The accounts when published will be available from the Company's registeredoffice 10 Didcot Way, Boldon Business Park, Boldon, Tyne & Wear, NE359PD, United Kingdom. 2. TURNOVER & SEGMENTAL INFORMATION An analysis of turnover by destination is given below: 2007 2006 £ £United Kingdom 2,851,869 2,146,716Overseas 7,070,558 5,985,965 ----------------------- ----------------------- 9,922,427 8,132,681 ======================= ======================= Turnover and profit before tax, relate principally to the main activity of themanufacturing and distributing of medical diagnostic products, and attributableto the continuing operations of the group. 3. EARNINGS PER ORDINARY SHARE The calculations of earnings per share are based on the following profits andnumbers of shares. 2007 2006 £ £ (restated) Profit on ordinary activities after tax 1,592,429 828,995 ========= ========= No. No.Weighted average no of shares: For basic earnings per share 13,344,667 13,344,667Effect of dilutive potential ordinary shares: -Share Options 1,242,392 524,178 ------------------- -----------------For diluted earnings per share 14,587,059 13,868,845 =================== ================= Basic earnings per share 11.933p 6.212pDiluted earnings per share 10.917p 5.977p 4. RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS GROUP 2007 2006 £ £ (restated)Profit for the financial year 1,592,429 828,995Dividends Paid (133,447) -Foreign exchange translation differences on (11,421) (9,606)foreign currency net investment in subsidiaries Share based payments charged to equity reserve 76,830 125,607 ----------------- --------- 1,524,391 944,996Issue of shares - (30,276)Gift of shares to employees by EBT (4,265) 229,736 ----------------- ---------Net addition to funds 1,520,126 1,144,456 Opening shareholders' funds 2,867,727 1,760,953Prior Year Adjustment (Note 6) 46,449 8,767 ---------------- -----------Closing shareholders' funds 4,434,302 2,914,176 ================ =========== TOTAL SHAREHOLDERS' FUNDS 4,434,302 2,914,176 ================ =========== At 31 March 2007, the Immunodiagnostics Systems Holdings plc had an investmentin its own shares via the Employee Benefit Trust. The number of own shares heldat 31 March 2007 was 10,503 ordinary shares (2006 - 10,503). The market value ofthe shares at the year end which had not unconditionally vested in employees was£27,623. The consideration paid for own shares was £6,535 (2006:£2,270). 5. CASH FLOWS a Reconciliation of operating profit to net cash inflow from operatingactivities 2007 2006 £ £ (restated) Operating profit 2,208,988 1,117,331Amortisation of intangible fixed assets 49,215 129,990Depreciation of tangible fixed assets 212,295 160,545Profit on disposal of fixed assets - -Amortisation of government grants (3,939) (3,939)Increase in stocks (109,437) (42,601)Increase in debtors (545,166) (291,437)Increase in creditors 259,875 18,334Reserves movement on foreign entities (11,421) (9,606)Adjustment in respect of share option schemes 76,830 125,607Share of (profits) /losses of associates (1,226) 11,657 --------- ---------Net cash inflow from operating activities 2,136,014 1,215,881 ========= ========= b Analysis of cash flows for headings netted in the cash flow Returns on investment and servicing of finance Interest received 19,100 14,806Interest paid (27,932) (77,955)Interest element of hire purchase (11,306) (5,803) --------- ---------Net cash outflow from returns on investments and (20,138) (68,952)servicing of finance ========= ========= Taxation Taxation (428,328) (127,889) ========= ========= Capital expenditure and financial investment Payments to acquire intangible fixed assets (245,975) (158,354)Payments to acquire tangible fixed assets (544,638) (133,282)Receipt from sale of fixed asset investment - 234 --------- ---------Net cash outflow for capital expenditure and (790,613) (291,402)financial investment ========= ========= Equity dividends paid Equity dividends paid (133,447) - ========= ========= 2007 2006 £ £Financing Share issue costs - (30,276)Repayment of bank loans (589,906) (195,385)Capital element of hire purchase (98,834) (60,994) --------- ---------Net cash outflow from financing (688,740) (286,655) ========= ========= c Analysis of net debt At 1 Apr Cash Other At 31 Mar 2006 flows changes 2007 £ £ £ £Cash in hand and at 885,094 74,748 - 959,842bank --------- --------- --------- --------- 885,094 74,748 - 959,842 --------- --------- --------- ---------Debt due within 1 (205,962) 205,962 - -year Debt due after 1 year (383,944) 383,944 - -Hire purchase (125,709) 98,834 (57,929) (84,804)agreements --------- --------- --------- --------- (715,615) 688,740 (57,929) (84,804) --------- --------- --------- ---------Total 169,479 763,488 (57,929) 875,038 ========= ========= ========= ========= 6. PRIOR YEAR ADJUSTMENTS a Share based payments The group adopted the provisions of FRS20 for Share Based Payments for the firsttime during the year. As a result, the fair value of the share option at thegrant date is to be recognised over the vesting period of the option. This had the effect of decreasing the brought forward profit and loss reserve byproviding for the related amount in the 2006 accounts and creating a shareoption reserve. A further charge has been made in the 2007 profit and lossaccount. The comparative figures in the financial statements and notes have been restatedto reflect this new policy. The effect of this change is as follows: GROUP Profit and loss account 2006 2005 £ £Administrative expenditure - Share based payments 125,607 28,922Taxation (37,682) (8,767) --------- ---------Decrease in profit for the financial year 87,925 20,155 ========= ========= Balance sheet 2006 £ Deferred tax 46,449 Other reserve - Shares to be issued (154,529) Profit and loss account 108,080 --------- Increase in net assets - ========= b Change in allocation of costs The group has revised the allocation of costs between Cost of Sales,Distribution costs and Administrative expenses to better reflect the nature ofthe business. This had no effect on the operating profit. The effect of this change for the 2006 accounts is as follows: GROUP Profit and loss account 2006 £Cost of sales increase 262,648Distribution costs increase 51,306Administrative expenses decrease (313,954) ---------Change in Operating Profit for the year - ========= This information is provided by RNS The company news service from the London Stock Exchange