IQE Regulatory News (IQE)

17 Mar 2008 07:01

IQE PLC17 March 2008 17 March 2008 IQE plc 54% revenue jump drives return to operating profitability, outlook strong IQE plc (AIM: IQE, "the Group"), the leading global supplier of advanced waferproducts and wafer services to the semiconductor industry, has announced itsPreliminary Results for the year ended 31 December 2007. FINANCIAL HIGHLIGHTS • Revenues jump 54% to £50.1m (2006: £32.4m), up 69% at constant exchange rates • Continued margin improvement with gross profit up 250% to £8.2m (2006: £2.3m) • EBITDA profit up £5.6m at £3.9m (2006: loss £1.7m) before exceptional items • Operating profit up £4.6m at £0.6m (2006: loss £4.0m) before exceptional items • Cash generated from operations £1.9m (2006: outflow £4.4m) BUSINESS HIGHLIGHTS • Return to operating profitability demonstrating powerful, highly leveraged business model • Year of strong delivery on strategy • Continued focus on high growth global markets driven by high speed wireless communications, mobile devices, solar cells and solid state lighting • Acquisitions made during 2006 successfully integrated into Group and contributed strongly • Firmly established as industry leader in advanced wafer outsourcing TRADING OUTLOOK • Q1 2008 continuing strongly, with revenues currently running between 30 to 40% ahead of 2007, • Market conditions continuing to show robust demand for Gallium Arsenide (GaAs) based products driven principally by 3G and other high speed wireless applications • Strong forward demand for GaAs wafers is a consequence of the rapidly increasing number of GaAs components in each high speed mobile communication device, resulting in demand growth for GaAs components which is significantly outstripping growth in the overall handset and wireless communication markets. Dr Drew Nelson, IQE Chief Executive, commenting on the results said: "2007 saw the third consecutive year of substantial revenue growth averaging 50%per annum and a return to operating profitability as a result of delivering onour strategy, and our clear focus on high growth markets "Our major markets have continued to be driven by the increasing demand for GaAsbased components for high speed, feature rich mobile devices that demand thehigh levels of performance and functionality that our products deliver. IQE isnow widely recognised as the global market leader in advanced semiconductorwafer outsourcing. "Our strategy of focusing on rapidly growing technologies has given us a solidbase from which we can deliver continued and sustainable growth. "Now that we are generating profits and cash from operations we have also put inplace significantly enhanced banking facilities to support our continued growth.In the current economic climate, this new facility signals a resounding vote ofconfidence in IQE's strategy, its business model and management team. "We have maintained our strong growth throughout the first quarter of 2008, andcontinue to see robust forward demand from our customers, particularly in thehigh speed wireless communications sector. We are confident of another year ofstrong growth." Contacts: IQE plc +44 29 2083 9400Drew NelsonPhil RasmussenChris Meadows College Hill +44 20 7457 2020Adrian Duffield/Ben Way Noble & Company Limited + 44 20 7763 2200John Llewellyn-Lloyd/ Sam Reynolds Panmure Gordon (UK) Limited +44 20 7459 3600Aubrey Powell/ Ashton Clanfield NOTE TO EDITORS IQE plc is the leading global supplier of advanced semiconductor wafers withproducts that cover a diverse range of applications. It is able to provide a'one stop shop' for the wafer needs of the world's leading compoundsemiconductor manufacturers, who in turn use these wafers to make the chipswhich form the key components of virtually every high technology system. IQE hasparticular focus on the growing global wireless sector for applicationsincluding; mobile handsets, wireless infrastructure, Wi-Fi, WiMAX, basestations, GPS and satellite communications; as well as for the opticalcommunication sector including; optical storage (CD, DVD), laser optical mice,laser printers & photocopiers, thermal imagers, leading-edge medical products,bar-coding, high efficiency LEDs and advanced solar cells. The manufacturers of these chips are increasingly seeking to outsource waferproduction to specialist foundries such as IQE in order to reduce overall wafercosts and accelerate time to market. IQE is unique in being able to supplywafers using all of the leading crystal growth technology platforms includingMetal Organic Vapour Phase Epitaxy (MOVPE) and Molecular Beam Epitaxy (MBE) andthe Group is able to leverage its global purchasing volumes to reduce the costof raw materials. IQE also provides bespoke R&D services to deliver customized materials forspecific applications and offers specialist technical staff to manufacture tospecification either at its own facilities or on the customer's own sites. Thisis backed by a strategy of duplicating each key product processes over multiplesites to assure customers of security of supply as well as provide compellingcustomer benefits in terms of flexibility and predictability of cost, therebysignificantly reducing operating risk. IQE operates six manufacturing facilities; two in Cardiff and one in MiltonKeynes in the UK; two more in Bethlehem, Pennsylvania and Somerset, New Jerseyin the USA; and its most recent acquisition in Singapore. The Group also has 11sales offices located in major economic centres worldwide. PRELIMINARY RESULTS 2007 1. OVERVIEW 2007 represented a major milestone for the Group as our strategy to focus onhigh speed mobile products delivered solid results and clearly demonstrated thestrength of our highly geared business model. The Group returned to operating profitability through a strong focus on highgrowth markets. 2007 represents the third year of strong revenue growthaveraging 50% per annum. The acquisitions made during 2006 were quickly andefficiently integrated within the Group, and have contributed strongly to IQE'sstrategic positioning and financial performance. Following these acquisitions the Group now has a global footprint and is widelyrecognised as the leading player within the compound semiconductor waferindustry. Furthermore, IQE is unique in being able to offer a comprehensiveproduct portfolio using both MOVPE and MBE production platforms acrossmulti-site manufacturing facilities. Our global presence is further enhancedthrough our network of sales locations which provide access to all the world'smajor economic regions. IQE has also been successful in reducing its business risk by expanding thecustomer base and widening the product portfolio. This diversification meansthat IQE's sales are now much more closely correlated with the end markets andin particular the market for high speed wireless communication. 2. RESULTS Revenue of £50.1m was significantly higher than 2006 (£32.4m), representing ayear on year increase of 54% (69% underlying increase before the impact offoreign exchange translation). From this 54% increase in revenues the business delivered a 250% increase ingross profit from £2.3m to £8.2m. This substantial improvement clearlydemonstrates the powerful leverage of the business model and the benefit ofimproved efficiencies. Selling, General and Administrative expenses ("SG&A") were £8.1m (2006: £6.1m),which represents 16.1% of sales (2006: 18.7%). Before exceptional items SG&Aincreased by £1.4m due to the inclusion of the two businesses acquired during2006. In addition, during 2007 we incurred £0.4m of one-off exceptional costsrelating to the relocation of our Singapore operation to a new state-of-the-artfacility which provides considerable room for expansion, This relocation is ontrack and will be completed during 2008. In 2006 we recognised an exceptionalcredit of £0.2m relating to the release of an onerous lease provision. EBITDA (before exceptional items) for the year was £3.9m (2006: EBITDA loss of£1.7m), and operating profit (before exceptional items) was £0.6m (2006:operating loss of £4.0m). This strong financial performance and return tooperating profitability reflect that 2007 has been a milestone year for theGroup and marks a strong delivery against a robust strategy. Including interest and exceptional costs, the retained loss was £0.9m (2006:loss £4.0m), representing a loss per share of 0.21 pence (2006: 1.14 pence lossper share) Working capital was carefully managed and increased by only £0.8m on a £17.7mincrease in revenues. This limited absorption of cash into working capital hasassisted with the strong conversion of our operating profit into a positive cashinflow from operating activities of £1.2m (2006: outflow of £4.7m) Capital expenditure increased to £7.8m (2006: £1.4m) as it included £2.7mrelating to the purchase of property and an investment of £3.6m in additionalcapacity in specific areas to address growing demand for specific customers.The major items of capital expenditure were funded by £5.5m of new loans. TheGroup also invested £1.4m (2006: £0.2m) in development expenditure which hasbeen capitalised. Net debt at December was £14.2m (2006: £5.9m). Shortly after the year end, theGroup appointed Lloyds TSB Corporate Markets as its principal banker and agreednew, significantly increased banking facilities of up to £15.5m for the purposeof financing growth and working capital. 3. STRATEGY IQE's strategy is to focus on fast growth, high volume technologies, and inparticular, high speed wireless communications and consumer opto electronics.In addition, the Group is also actively engaged in developing advanced solarcell technology, ultra efficient LEDs and ultra high speed microprocessor andmemory chip materials technology for these fast growth, high volume emergingmarkets. In order to provide customers with the most competitive outsource wafer serviceglobally, IQE has developed a unique set of advantages, including : • offering a complete range of products covering all major applications; • offering global multi-site production capabilities in the primary manufacturing platforms to allow efficient capacity planning and for disaster scenario contingency; • maintaining a broad contact base with access to all the key global markets; • delivering benefits from economies of scale including purchasing power and research and development efficiencies; • promoting the sharing of best practices and innovation to deliver improved operating and cost efficiencies; and • providing surge capacity to meet the expected growth in demand in the mobile device sector and other high volume activities This strategy has delivered tangible results in the current generation ofwireless products that have dominated IQE's output during 2007 and will continueto deliver on current and next generation products. In addition, IQE is alsoable to leverage its large manufacturing capacity in order to deliver tangiblebenefits to customers, staff and shareholders alike. 4. PRODUCTS AND MARKETS Our product roadmap and strategy continues to be driven by four key marketdynamics, all of which have fast growth, high volume prospects: • The increasing adoption of high speed mobile communications, including3G, WiFi , WiMAX, WiBro, GPS and other wireless technologies . As mobiletechnologies continue to advance at an enormous pace with new featuresconstantly emerging, the role of advanced compound semiconductor materials hasbecomes critical in enabling high speed data processing whilst maintaining lowlevels of power consumption. IQE's products are absolutely critical in the driveto 3G and beyond, along with the need for backward compatibility and the speedand power to accommodate features such as high resolution imaging, video, highspeed wireless data access, VoIP and satellite navigation. Each high speedcommunication device now contains multiple numbers of GaAs components comparedwith earlier generations, creating a powerful demand driver for GaAs componentsand wafers which far outsrips the growth of the overall communications market. • The ubiquity of applications for high volume semiconductor lasers,including HD DVD, laser mouse, laser projection, and office and industrialapplications. In particular, laser projection is viewed as one of the mostexciting applications of this technology, eventually being incorporated intomobile handsets • The accelerating drive for clean, efficient and sustainable energysources (solar cells), and highly efficient light sources (LEDs) in order toreduce the impact on global warming, reliance on fossil fuels and provide a muchcleaner environment. Compound semiconductors are playing a critical role, andIQE are involved in leading edge development for these applications, havingachieved world leading results through its partners for solar cell efficiencies. • The continuing need for higher speed, more powerful microprocessorsand higher speed, ultra high density memories. This is driving the demand fornew materials solutions based on silicon substrates including the incorporationof compound semiconductors directly onto silicon substrates. IQE hasestablished powerful positions in both these technologies, working with some ofthe biggest names in the industry Each of these markets has very powerful growth potential, with wireless beingthe current key driver. 5. OPERATIONAL UPDATE Following the acquisitions in 2006, we completed a number of key operationalinitiatives during 2007 to enhance the Group's productive efficiency, andleverage the inherent large manufacturing capacity in order to offer ourcustomers multi-site, multi-platform manufacturing solutions. Most notablythese successes include : • the successful integration of both acquisitions, with both subsidiaries contributing strongly during 2007; • securing a new state-of-the-art manufacturing facility in Singapore on very attractive terms, with the successful installation of equipment and initial manufacturing already commenced; • the successful alignment of key switch technologies across the Group for dual-site manufacture for several customers; • the transfer to, and successful product qualification of, advanced HBT (power amplifier) technology in Cardiff from New Jersey; • the successful management of ramping production to satisfy rapid growth in customer demand and; • the successful completion of several major R&D projects which are leading to significant follow on awards. 6. TRADING OUTLOOK Following the successful integration of the two major acquisitions made in 2006,the Group is widely recognised as the global market leader in advanced waferoutsourcing. The successes of 2007 have provided clear evidence of our corestrategy delivering tangible results with a third consecutive year ofsubstantially increased revenue and a return to operating profitability. Inparticular, with the successful qualification of various customers and new toolsduring Q4'07, the year ended very strongly. Trading for the first quarter of 2008 has continued strongly, with revenuescurrently running between 30-40% ahead of the equivalent period last year, andthe market conditions for IQE's products continuing to show robust demand drivenprincipally by 3G and other high speed wireless applications. Whilst we remain highly focussed on the wireless mobile communications markets,there are also a number of other key high growth and high volume opportunitiesbeing rapidly developed across the Group. As a result, we look forward toanother year of high growth and sustained profitability. PRELIMINARY RESULTS FORYEAR ENDED 31 DECEMBER 2007 CONSOLIDATED INCOME 6 months to 6 months to 12 months to 12 months to STATEMENT 31 Dec 2007 31 Dec 2006 31 Dec 2007 31 Dec 2006(All figures GBP000s) Note Unaudited Unaudited Unaudited Unaudited Revenue 26,385 17,830 50,065 32,421Cost of sales (22,031) (16,747) (41,838) (30,072) Gross profit 4,354 1,083 8,227 2,349 Selling, general and administrative expenses(including exceptionalitems) 3 (4,243) (3,263) (8,053) (6,050) Operating profit/(loss) 111 (2,180) 174 (3,701)Operating profit/(loss) % 0.4 (12.2) 0.3 (11.4) Operating profit/(loss) 550 (2,180) 613 (3,956)before exceptional itemsExceptional items 3 (439) 0 (439) 255 Operating profit/(loss) 111 (2,180) 174 (3,701)Operating profit/(loss) % before exceptional items 2.1 (12.2) 1.2 (12.2) Finance income 53 55 58 104Finance costs (523) (224) (1,094) (393) Loss for the period attributable to equityshareholders (359) (2,349) (862) (3,990) Basic Loss Pence per 4 (0.08) (0.61) (0.20) (1.14)Ordinary 1p ShareDiluted Loss Pence per 4 (0.08) (0.61) (0.20) (1.14)Ordinary 1p Share EBITDA is calculated asfollows: Loss for the period attributable to equityshareholders (359) (2,349) (862) (3,990)Share based payments 372 330 571 501Exceptional items 439 0 439 (255)Net interest payable 469 169 1,036 289Depreciation of tangible fixed assets 1,289 935 2,400 1,617Amortisation of intangible fixed assets 150 90 307 136 Earnings before interest, taxes, depreciation,amortisation andexceptionals (EBITDA) 2,360 (825) 3,891 (1,702) CONSOLIDATED STATEMENT OF RECOGNISED 6 months to 6 months to 12 months to 12 months toINCOME AND EXPENSE 31 Dec 2007 31 Dec 2006 31 Dec 2007 31 Dec 2006(All figures GBP000s) Unaudited Unaudited Unaudited Unaudited Loss for the period (359) (2,349) (862) (3,990)Currency translation differences on foreigncurrency net investments (510) (603) (743) (916) Total recognised expense for the period (869) (2,952) (1,605) (4,906) As At As AtCONSOLIDATED BALANCE SHEET 31 Dec 2007 31 Dec 2006(All figures GBP000s) Unaudited Unaudited Non-current assets :Intangible assets 12,110 11,095Tangible assets 17,243 11,803 Total non-current assets 29,353 22,898 Current assets :Inventories 7,643 8,580Trade and other receivables 10,599 6,480Cash and cash equivalents 11 4,071 Total current assets 18,253 19,131 Total assets 47,606 42,029 Current liabilities :Borrowings (5,911) (2,754)Trade and other payables (10,354) (8,041) Total current liabilities (16,265) (10,795) Non-current liabilities :Borrowings (8,259) (7,234)Deferred income (122) (160) Total non-current liabilities (8,381) (7,394) Total liabilities (24,646) (18,189) Net assets 22,960 23,840 Shareholders' equity :Ordinary shares 4,310 4,299Share premium 172,183 172,030Other reserves (1,092) (910)Profit and loss account (152,441) (151,579) Total shareholders' equity 22,960 23,840 Approved by the Directors of IQE plc on16 March 2008 CONSOLIDATED CASH FLOW 6 months to 6 months to 12 months to 12 months to STATEMENT 31 Dec 2007 31 Dec 2006 31 Dec 2007 31 Dec 2006(All figures GBP000s) Note Unaudited Unaudited Unaudited Unaudited Cash flows from operatingactivities :Cash inflow/(outflow) from operations 6 1,435 (982) 1,828 (4,418)Interest received 53 55 58 104Interest paid (335) (198) (763) (367) Net cash inflow/(outflow) from operating activities 1,153 (1,125) 1,123 (4,681) Cash flows from investingactivities :Purchase of subsidiary undertakings 0 (11,227) 0 (11,227)Cash acquired in subsidiary undertakings 0 1,023 0 1,023Development expenditure (642) (222) (1,372) (222)Investment in other intangible fixed assets (20) 0 (20) 0Purchase of tangible fixed assets (3,840) (454) (7,814) (1,431)Proceeds from sale of tangible fixed assets 97 91 97 251 Net cash used in investing activities (4,405) (10,789) (9,109) (11,606) Cash flows from financingactivities :Issues of ordinary share capital 26 15,868 154 15,920Loans and leases received/ (repaid) 952 (1,077) 2,750 (1,807) Net cash generated from financing activities 978 14,792 2,904 14,113 Net (decrease)/increase in cash and cash equivalents (2,274) 2,878 (5,082) (2,174) Cash and cash equivalents at the beginning of the period 1,263 1,193 4,071 6,245 Cash and cash equivalents at the end of the period 7 (1,011) 4,071 (1,011) 4,071 NOTES TO THE PRELIMINARY RESULTS 1 BASIS OF PREPARATION These unaudited preliminary results have been prepared under the historical costconvention and in accordance with International Financial Reporting Standards("IFRS") and interpretations in issue at 31 December 2007. The Group published an IFRS transition statement on 14 August 2007 which set outthe effect of adopting IFRS for the Group, the basis of preparation, theaccounting policies, and details of significant adjustments in respect of theopening balance sheet at 1 January 2006, the results for the year ended 31December 2006 and the balance sheet at 31 December 2006. These are detailed inNotes 8 to 10 below. The preliminary results were approved by the Board of Directors and the AuditCommittee on 16 March 2008. The preliminary results do not constitute statutoryaccounts within the meaning of the Companies Act 1985 and have not been audited.Comparative figures in the results for the year ended 31 December 2006 havebeen taken from the IFRS preliminary results transitional statement. All periodspresented are unaudited. The preliminary results will be announced to all shareholders on the LondonStock Exchange and published on the Group's website on 17 March 2008. Copieswill be available to members of the public upon application to the CompanySecretary at Pascal Close, Cypress Drive, St Mellons, Cardiff CF3 0LW. 12 months to 12 months to2 SEGMENTAL INFORMATION 31 Dec 2007 31 Dec 2006 (All figures GBP000s) Unaudited Unaudited Revenue by business segment : Wireless 38,088 20,271 Optoelectronics 9,212 10,066 Electronics 2,765 2,084 Total revenue 50,065 32,421 Operating proft/(loss) by business segment : Wireless 3,583 (166) Optoelectronics (2,840) (2,361) Electronics (569) (1,174) Total operating profit/(loss) 174 (3,701) 12 months to 12 months to3 EXCEPTIONAL ITEMS 31 Dec 2007 31 Dec 2006 (All figures GBP000s) Unaudited Unaudited Exceptional items comprise : Relocation costs 439 0 Onerous lease provisions 0 (255) Exceptional items (included in selling, general and administrative expenses) 439 (255) The exceptional charge of £439,000 in 2007 relates to the one-off costs incurredin relocating the Singapore operation to a new state-of-the-art facility. Therelocation is progressing according to plan and will be completed during 2008. The exceptional credit of £255,000 in 2006 relates to the release of an onerouslease provision in respect of a property which the Gropup has vacated. 4 LOSS PER SHARE 6 months to 6 months to 12 months to 12 months to 31 Dec 2007 31 Dec 2006 31 Dec 2007 31 Dec 2006 Unaudited Unaudited Unaudited Unaudited Loss for the period GBP 000s (359) (2,349) (862) (3,990) Weighted average number of ordinary shares 430,840,183 315,976,014 430,601,406 350,729,318 Diluted share options 14,883,360 8,593,469 14,883,360 8,593,469 Adjusted weighted average number of ordinary shares 445,723,543 324,569,483 445,484,766 359,322,787 Basic loss pence per share (0.08) (0.61) (0.20) (1.14) Diluted loss pence per share (0.08) (0.61) (0.20) (1.14) Basic loss per share is calculated by dividing the loss attributable to ordinaryshareholders by the weighted average number of ordinary shares during theperiod. Diluted loss per share is calculated by adjusting the weighted averagenumber of ordinary shares in issue on the assumption of conversion of alldilutive potential ordinary shares. IAS 33 requires the presentation of diluted Loss Pence per Share when a companycould be called upon to issue shares that would decrease net profit or increasenet loss per share. For a loss-making company with outstanding share options,net loss per share would only be increased by the exercise of the out of themoney options. Since it seems inappropriate to assume that option holders wouldact irrationally, no adjustment has been made to diluted Loss Pence per Sharefor out of the money share options. 5 STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY 6 months to 6 months to 12 months to 12 months to 31 Dec 2007 31 Dec 2006 31 Dec 2007 31 Dec 2006 (All figures GBP000s) Unaudited Unaudited Unaudited Unaudited At the beginning of the period 23,430 10,595 23,840 12,325 Loss for the period attributable to equity (359) (2,349) (862) (3,990) shareholders Share option costs credited to reserves 373 329 571 501 Shares issued net of issue costs 26 15,868 154 15,920 Net exchange differences offset in reserves (510) (603) (743) (916) At the end of the period 22,960 23,840 22,960 23,840 6 months to 6 months to 12 months to 12 months to6 CASH GENERATED FROM OPERATIONS 31 Dec 2007 31 Dec 2006 31 Dec 2007 31 Dec 2006 (All figures GBP000s) Unaudited Unaudited Unaudited Unaudited Operating loss 111 (2,180) 174 (3,701) Depreciation of tangible assets 1,289 935 2,400 1,618 Amortisation of intangible assets 183 90 307 136 Loss/(gain) on sale of tangible assets (5) 24 (5) (38) Government grants released (19) (19) (39) (39) Non cash share based payments 372 330 571 501 Operating profit/(loss) before changes in 1,931 (820) 3,408 (1,523) working capital Decrease/(increase) in inventories 451 (256) 937 (1,536) (Increase)/decrease in trade and other (2,058) (361) (4,118) (1,930) receivables Increase/(decrease) in trade and other payables 1,111 455 1,601 571 Cash inflow/(outflow) generated from operations 1,435 (982) 1,828 (4,418) As At As At7 ANALYSIS OF NET DEBT 31 Dec 2007 31 Dec 2006 (All figures GBP000s) Unaudited Unaudited Cash at bank and in hand 0 3,085 Highly liquid investments 11 986 Total cash and cash equivalents 11 4,071 Overdraft (1,022) 0 Loans due after one year (7,862) (7,226) Loans due within one year (5,151) (2,731) Finance leases due after one year (89) (7) Finance leases due within one year (45) (24) Total borrowings (14,170) (9,988) Net debt (14,159) (5,917) 8 RECONCILIATION OF OPERATING LOSS FOR YEAR ENDED 31 DECEMBER 2006 12 months to UNDER UK GAAP TO IFRS 31 Dec 2006 (All figures GBP000s) Unaudited Operating loss per UK GAAP (3,977) Capitalisation of development costs 222 Amortisation of intangible assets (136) Amortisation of goodwill 166 Provision for holiday pay 24 Operating loss per IFRS (3,701) 9 RECONCILIATION UK GAAP IFRS 3 IAS 38 IAS 19 IFRS OF SHAREHOLDERS' Re-formatted Business Intangible Assets Employee Benefits EQUITY AT Combinations 31 DECEMBER 2005UNDER UK GAAP TO IFRS (All figures GBP000s) Unaudited Unaudited Unaudited Unaudited Unaudited Non-current assets : Intangible assets 0 0 183 0 183 Tangible assets 8,816 0 (62) 0 8,754 Total non-current assets 8,816 0 121 0 8,937 Current assets: Inventories 4,312 0 0 0 4,312 Trade and other receivables 3,404 0 0 0 3,404 Cash and cash equivalents 6,245 0 0 0 6,245 Total current assets 13,961 0 0 0 13,961 Current liabilities: Borrowings (1,739) 0 0 0 (1,739) Trade and other payables (4,616) 0 0 (117) (4,734) Total current liabilities (6,355) 0 0 (117) (6,473) Non-current liabilities: Borrowings (3,646) 0 0 0 (3,646) Deferred income (199) 0 0 0 (199) Provision for liabilities and charges (255) 0 0 0 (255) Total non-current liabilities (4,100) 0 0 0 (4,100) Net assets 12,323 0 121 (117) 12,325 Shareholders' equity: Ordinary shares 3,163 0 0 0 3,163 Share premium 157,264 0 0 0 157,262 Other reserves (509) 0 0 0 (509) Profit and loss account (147,594) 0 121 (117) (147,591) Total shareholders' equity 12,323 0 121 (117) 12,325 UK GAAP IFRS 3 IAS 38 IAS 19 IFRS10 RECONCILIATION Re-formatted Business Combinations Intangible Assets Employee Benefits OF SHAREHOLDERS' EQUITY AT 31 DECEMBER 2006 UNDER UK GAAP TO IFRS (All figures GBP000s) Unaudited Unaudited Unaudited Unaudited Unaudited Non-current assets : Goodwill 10,903 (2,303) 0 0 8,600 Intangible assets 0 2,172 323 0 2,495 Tangible assets 11,861 0 (58) 0 11,803 Total non-current assets 22,764 (131) 265 0 22,898 Current assets: Inventories 8,580 0 0 0 8,580 Trade and other receivables 6,480 0 0 0 6,480 Cash and cash equivalents 4,071 0 0 0 4,071 Total current assets 19,131 0 0 0 19,131 Current liabilities : Borrowings (2,754) 0 0 0 (2,754) Trade and other payables (8,162) 214 0 (93) (8,041) Total current liabilities (10,916) 214 0 (93) (10,795) Non-current liabilities : Borrowings (7,234) 0 0 0 (7,234) Deferred income (160) 0 0 0 (160) Total (7,394) 0 0 0 (7,394) non-current liabilities Net assets 23,585 83 265 (93) 23,840 Shareholders' equity: Ordinary shares 4,299 0 0 0 4,299 Share premium 172,031 0 0 0 172,031 Other reserves (910) 0 0 0 (910) Profit and loss account (151,834) 83 265 (93) (151,579) Total shareholders' equity 23,585 83 265 (93) 23,840 11 CONTINGENT LIABILITY The Group received a claim in 2005 for approximately £1 million in respect ofnational insurance contributions in relation to share options that were issuedin 1999. Having sought legal opinion, the Board remains robust in its opinionthat the Group has meritorious defences to this claim. Accordingly, noprovision has been made in the preliminary results for 2007. This information is provided by RNS The company news service from the London Stock Exchange