Jaywing Regulatory News (JWNG)

24 Nov 2008 07:00



Date: 24 November 2008

On behalf of: Digital Marketing Group plc ("DMG", "the Company" or "the Group")

Embargoed: 0700hrs

Digital Marketing Group plc

Interim Results 2008/9

Digital Marketing Group plc (AIM: DIGI), the digital direct marketing specialists, today announced its interim results for the six months ended 30 September 2008.

Performance Highlights

Commenting on the results, Stephen Davidson, Chairman of Digital Marketing Group plc, said: "In the worst economic conditions for decades this is a truly excellent set of results. The combination of a single minded focus on digital direct marketing and our strong and experienced management team continues to deliver for our shareholders. The financial health of the company is also very strong with net debt of £1.82m (2007: £4.33m). The Group has settled all its earnout liabilities and gearing decreased to 4% at 30 September 2008 (2007: 11%). As at 30 September the Group had £9.27m of undrawn borrowing facilities taking into account credit cash balances (2007: £6.74m). With good revenue visibility we are approaching the second half of the year in a spirit of cautious optimism."

Ben Langdon, Chief Executive, added: "Digital Marketing Group is now the third largest digital marketing agency in the UK. This alone is a significant achievement. Our strong financial performance is an endorsement of our strategic decision to focus on digital and data and evidence of the continuing shift in spend away from traditional media. We will continue to benefit from this trend through recession as clients recognise the value in measurable media that delivers ROI. Finally, our success at leveraging our strong client base is evidence of the effective integration that has taken place over the last two years at DMG. We are well placed financially to benefit from any consolidation that may take place in this industry."

Enquiries:

Digital Marketing Group plc	www.digitalmarketinggroup.co.uk
Ben Langdon, Chief Executive	via Redleaf Communications
Redleaf Communications	DMG@Redleafpr.com
Emma Kane/Paul Dulieu/Kathryn Hurford	Tel: 0207 566 6700
Cenkos Securities
Ivonne Cantu/Julian Morse	Tel: 0207 397 8900

Notes to Editors:

At the heart of the company is Digital Brain - a process which enables the real time integration of "digital, direct and data". This helps create unique contact strategies for each individual based on their historical data and real time interactions regardless of channel.

Digital Marketing Group's development strategy consists of three key elements:

Digital Marketing Group operates three business segments:

1. Online Marketing and Media

2. Data Services 

3. Direct Marketing 

Publication quality photographs are available via Redleaf Communications.

  INTERIM RESULTS

The Group reported revenues of £26.48m which is up 20% year on year (2007: £22.14m). 

Gross profit, which represents revenue less direct costs of sales, is an important measure in our industry and I am also pleased to report a gross profit of £18.72m which is up 27% year on year (2007: £14.77m). Like for like gross profit growth is 12%.

EBITDA before charges for share options of £3.85m is up 26% year on year (2007: £3.06m) and on a like for like basis growth is 10%.

Profit before tax, amortisation and charges for share options of £3.37m is up 35% year on year (2007: £2.49m). On a like for like basis, excluding the impact of acquisitions in 2007, profit before tax, amortisation and charges for share options growth is 17%. Reported profit before tax of £1.00m is up 19% year on year (2007: £0.84m).

The adjusted EPS (profit before tax, amortisation and charges for share options less current tax charge) is up 17% to 3.75p (2007: 3.20p). 

ACQUISITIONS AND FINANCING

The Group's financial position remains strong with net debt of £1.82m (2007: £4.33m). The net debt figure reflects £2.65m spent on earn out payments during the last six months in relation to the previous acquisitions of Cheeze Limited and Graphico Limited. As at 30 September 2008, the Group had settled all its earn out liabilities. 

Gearing (net debt as % of total equity) decreased to 4% at 30 September 2008 (2007: 11%). As at 30 September the Group had £9.27m of undrawn borrowing facilities taking into account credit cash balances (2007: £6.74m). 

In October 2008 the Group secured £4m of additional banking facilities through a £2m increase in the existing revolving credit facility and an additional £2m term loan repayable over three years.

In October 2008 the Group completed the acquisitions of Cybercom Group UK Limited, Gasbox Limited and Prodant Limited. Total upfront cash payments relating to these acquisitions were £7.2m, with further deferred consideration of up to £12.6m, payable in cash or shares, subject to the acquisitions achieving certain performance criteria for the periods to 31 March 2009 and 31 March 2010.

Following the refinancing and acquisitions in October, the net debt position was £9.4m and the Group's financial position remains strong with a committed headroom of over £5m. 

NEW BUSINESS

In the six months to September 2008, the Group has won new business from Investors In People, Gatecrasher, Regus Group, Mothercare, Thomas Cook Financial Services, St Andrews Healthcare, and Danone.

The Group continues to benefit from cross referrals between Group companies which have generated over 13% of the six months' gross profit compared to 7% for the previous twelve months.

In September 2008 the Group was ranked the 3rd largest digital marketing agency in the UK by NMA Magazine. 

FINANCIAL REVIEW

The following information shows an analysis of the results for the six months to September 2008 and reported results for the six months to September 2007. This information is based on the unaudited management accounts of the individual entities prepared under UK GAAP.

At the end of June 2007 Graphico and Hyperlaunch joined the Group and our prior year reported results therefore represent post acquisition figures and comprise three months for both these businesses and six months for the other five.

For illustrative purposes only, additional pro forma information has been provided to include the full six months trading for all the Group's businesses for the six month period to September 2007. These pro forma figures have been adjusted for items which, in the judgement of the directors, are considered to be non-recurring, for example, excess management remuneration. 

The table below shows the performance of the Group with comparatives for the previous year.

		6mths Sep 08		6mths Sep 07		HY/HY Growth		6mths Sep 07 Pro forma		HY/HY Pro forma Growth
		£million		£million		%		£million		%
Revenue		26.48		22.14		20%		24.30		9%
Direct costs		(7.76)		(7.37)		5%		(7.60)		2%
Gross profit		18.72		14.77		27%		16.70		12%
Operating expenses, excluding central costs, interest, depreciation, amortisation and charges for share option		(14.12)		(11.33)		25%		(12.83)		10%
EBITDA before central costs and charges for share options		4.60		3.44		34%		3.87		19%
Central costs		(0.75)		(0.38)		97%		(0.38)		97%
EBITDA before charges for share options		3.85		3.06		26%		3.49		10%
Depreciation		(0.31)		(0.25)		24%		(0.28)		11%
EBITA before charges for share options		3.54		2.81		26%		3.21		10%
Net interest expense		(0.17)		(0.32)		(47%)		(0.32)		(47%)
Profit before tax, amortisation and charges for share options		3.37		2.49		35%		2.89		17%

As noted above, the pro forma September 2007 column is shown for illustrative purposes only. These figures have been adjusted for items which, in the judgement of the directors, are considered to be non-recurring, for example, excess management remuneration. 

Segmental financial performance 2008/09

In order to aid shareholders in reviewing our business we now use the following three segments:

1. Online Marketing and Media (Cheeze, Inbox Digital, Graphico, Hyperlaunch)

2. Direct Marketing (Dig For Fire, HSM)

3. Data Services and Consultancy (Jaywing)

	6 mths Sep 2008		6 mths Sep 2007		HY/HY Growth
	Gross Profit	EBITDA*	Gross Profit	EBITDA*	Gross Profit	EBITDA*
	£million	£million	£million	£million	%	%
Online Marketing & Media	6.88	1.86	4.02	1.14	71%	63%
Direct Marketing	5.35	0.97	5.52	1.19	(3%)	(18%)
Data Services & Consultancy	6.49	1.77	5.23	1.11	24%	59%
	18.72	4.60	14.77	3.44	27%	34%
Central costs	-	(0.75)	-	(0.38)	-	97%
Total	18.72	3.85	14.77	3.06	27%	26%
* EBITDA before charges for share options

On a pro forma basis, the equivalent growth by segment would have been:

	6 mths Sep 2008		6 mths Pro forma Sep 2007		HY/HY Pro forma Growth
	Gross Profit	EBITDA*	Gross Profit	EBITDA*	Gross Profit	EBITDA*
	£million	£million	£million	£million	%	%
Online Marketing & Media	6.88	1.86	5.95	1.56	16%	19%
Direct Marketing	5.35	0.97	5.52	1.19	(3%)	(18%)
Data Services & Consultancy	6.49	1.77	5.23	1.11	24%	59%
	18.72	4.60	16.70	3.86	12%	19%
Central costs	-	(0.75)	-	(0.38)	-	97%
Total	18.72	3.85	16.70	3.48	12%	10%
* EBITDA before charges for share options

The online marketing and media segment includes Graphico and Hyperlaunch which joined the Group in June 2007. On the pro forma basis, as explained above, the online marketing and media segment gross profit grew year on year by 16% and EBITDA (before charges for share options) grew by 19%.

The direct marketing segment has performed poorly due entirely to the underperformance of HSM. However, actions taken by management have resulted in a number of new client wins which will generate additional annualised gross profits of over £0.5m in 2009/10.

By comparison Dig for Fire continues to perform extremely well within the direct marketing segment and delivered 15% growth in gross profits and 19% growth in EBITDA (before charges for share options). 

As shown above the data services and consulting segment continues to perform well. This is in part a function of investment in the first half of 2007/08 which adversely affected profit in a successful effort to increase sales. As a consequence the EBITDA year on year growth is significantly higher in the first six months of the year than it is anticipated to be on a full year basis. 

OUTLOOK 

The outlook for online advertising remains positive despite the current economic environment. Many of our clients have increased their spend through digital channels whilst reducing their overall media and marketing spends. Digital media channels deliver better ROI relative to traditional media and this is becoming increasingly attractive for clients in an economic downturn. Indeed it appears that digital channels appear to be thriving as a direct result of recession:

The market context for digital media still remains encouraging:

Source: IAB/PwC Online Ad Spend Study H1 2008

In the current environment, we remain cautious in our approach to managing our business. Three of our companies have been affected by Kaupthing Singer & Friedlander going into administration both through the loss of expected gross profit in 2008 and pre administration bad debts. However, we forecast conservatively and we remain very confident in our business and the digital media market place. We are now the UKs third largest digital agency (NMA Magazine) and this enables us to pitch for and win significant new accounts. 

The outlook for the second half of the year and the full year forecast remain in line with market expectations reflecting both our strong position in the sector and the integrity and conservative approach of our budgeting process. 

Ben Langdon

Chief Executive

24 November 2008  INDEPENDENT REVIEW REPORT TO DIGITAL MARKETING GROUP PLC

Introduction

We have been engaged by the company to review the interim financial information in the interim report for the six months ended 30 September 2008 which comprises the consolidated interim income statement, consolidated interim balance sheet, consolidated interim cash flow statement and consolidated interim statement of changes in equity and the related notes 1 to 9. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the interim financial information. 

This report is made solely to the company in accordance with guidance contained in ISRE (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the company those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusion we have formed. 

Directors' responsibilities

The interim report is the responsibility of, and has been approved by, the directors. The AIM rules of the London Stock Exchange require that the accounting policies and presentation applied to the interim figures are consistent with those which will be adopted in the annual accounts having regard to the accounting standards applicable for such accounts. The annual financial statements of the group are prepared in accordance with the basis of preparation set out in Note 1.

Our responsibility

Our responsibility is to express to the company a conclusion on the interim financial information in the interim report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the financial information in the interim report for the six months ended 30 September 2008 is not prepared, in all material respects, in accordance with the basis of accounting described in Note 1. 

GRANT THORNTON UK LLP

REGISTERED AUDITOR

CHARTERED ACCOUNTANTS

SHEFFIELD

24 November 2008

  

Consolidated Interim Income Statement
	Note		Unaudited		Unaudited	Audited
		Six months		Six months		Year ended
		ended 30		ended 30		31 March
			Sept 2008		Sept 2007	2008
			£'000		£'000		£'000
Continuing operations
Revenue	2		26,475		22,138		50,971
Direct costs			(7,755)		(7,370)		(17,892)
Gross profit			18,720		14,768		33,079
Other operating income			137		16		212
Amortisation			(758)		(648)		(1,407)
Operating expenses			(16,927)		(12,982)		(29,204)
Operating profit			1,172		1,154		2,680
Finance income			145		64		252
Finance costs			(319)		(380)		(783)
Net financing costs			(174)		(316)		(531)
Profit before tax			998		838		2,149
Taxation	3		(667)		(301)		(1,013)
Profit for the period attributable to shareholders			331		537		1,136
Earnings per share	4
From continuing operations
- basic			0.50p		0.95p		1.79p
- diluted			0.40p		0.78p		1.44p

  

Consolidated Interim Balance Sheet
	Note		Unaudited		Unaudited	Audited
		30 Sept		30 Sept		31 March
			2008		2007		2008
			£'000		£'000		£'000
Non-current assets
Property, plant and equipment			2,096		2,128		2,215
Goodwill			39,249		38,712		39,449
Other intangible assets			12,639		14,083		13,324
			53,984		54,923		54,988
Current assets
Inventories			842		562		790
Trade and other receivables			8,422		8,539		9,582
Cash and cash equivalents			11,499		5,765		12,004
			20,763		14,866		22,376
Total assets			74,747		69,789		77,364
Current liabilities
Bank overdraft	5		8,976		4,603		6,901
Other interest-bearing loans and borrowings	5		1,886		1,130		1,122
Financial derivatives	6		155		-		195
Trade and other payables			9,696		13,377		17,168
Tax payable			1,927		1,021		1,242
Provisions			168		-		133
			22,808		20,131		26,761
Non-current liabilities
Other interest-bearing loans and borrowings	5		2,458		4,362		3,797
Provisions			64		450		225
Deferred tax liabilities			3,668		3,938		3,882
			6,190		8,750		7,904
Total liabilities			28,998		28,881		34,665
Net assets			45,749		40,908		42,699
Equity attributable to shareholders
Share capital			33,814		32,206		32,655
Share premium account			6,621		5,306		5,954
Hedging reserve			(155)		-		(195)
Shares to be issued			-		1,562		536
Retained earnings			5,469		1,834		3,749
Total equity			45,749		40,908		42,699

  

Consolidated Interim Cash Flow Statement
	Note		Unaudited		Unaudited	Audited
		Six months		Six months		Year ended
		ended 30		ended 30		31 March
			Sept 2008		Sept 2007	2008
			£'000		£'000		£'000
Cash flow from operating activities
Profit for the period			331		537		1,136
Adjustments for:
Depreciation, amortisation and impairment			1,067		902		1,994
Financial income			(145)		(64)		(252)
Financial expenses			319		380		783
Share-based payment expense			1,389		1,006		2,357
Taxation			667		301		1,013
Operating cash flow before changes in working capital and provisions			3,628		3,062		7,031
Decrease/(increase) in trade and other receivables			1,160		(629)		(1,672)
Increase in inventories			(52)		(106)		(334)
(Decrease)/increase in trade and other payables			(2,543)		121		4,021
Cash generated from the operation			2,193		2,448		9,046
Interest received			145		64		252
Interest paid			(319)		(380)		(717)
Tax paid			(196)		(438)		(1,194)
Net cash flow from operating activities			1,823		1,694		7,387
Cash flows from investing activities
Proceeds from sale of property, plant and equipment			-		-		10
Acquisitions of subsidiaries, net of cash acquired			(3,565)		(6,378)		(8,021)
Acquisition of property, plant and equipment			(263)		(333)		(747)
Net cash outflow from investing activities			(3,828)		(6,711)		(8,758)
Cash flows from financing activities
Proceeds from the issue of new share capital			-		9,463		9,463
Repayment of borrowings			(575)		(6,189)		(5,894)
Net cash (outflow)/inflow from financing activities			(575)		3,274		3,569
Net (decrease)/increase in cash and cash equivalents			(2,580)		(1,743)		2,198
Cash and cash equivalents at beginning of period			5,103		2,905		2,905
Cash and cash equivalents at end of period			2,523		1,162		5,103
Cash and cash equivalents comprise:
Cash at bank and in hand			11,499		5,765		12,004
Bank overdrafts	5		(8,976)		(4,603)		(6,901)
Cash and cash equivalents at end of period			2,523		1,162		5,103

  

Consolidated Interim Statement of Changes in Equity
	Share capital		Share premium account		Hedging reserve		Shares to be issued		Retained earnings		Total
	£'000		£'000		£'000		£'000		£'000		£'000
At 1 April 2007	25,063		2,986		-		500		291		28,840
Allotment of 50p Ordinary shares	7,143		2,320		-		-		-		9,463
Retained earnings	-		-		-		-		537		537
Credit in respect of share-based payments	-		-		-		-		1,006		1,006
Shares to be issued	-		-		-		1,062		-		1,062
At 30 September 2007	32,206		5,306		-		1,562		1,834		40,908
Allotment of 50p Ordinary shares	449		648		-		-		-		1,097
Retained earnings	-		-		-		-		599		599
Cash flow hedges	-		-		(195)		-		-		(195)
Credit in respect of share-based payments	-		-		-		-		1,316		1,316
Shares to be issued	-		-		-		(1,026)		-		(1,026)
At 31 March 2008	32,655		5,954		(195)		536		3,749		42,699
Allotment of 50p Ordinary shares	1,159		667		-		(536)		-		1,290
Retained earnings	-		-		-		-		331		331
Cash flow hedges	-		-		40		-		-		40
Credit in respect of share-based payments	-		-		-				1,389		1,389
At 30 September 2008	33,814		6,621		(155)		-		5,469		45,749

1 Basis of Preparation

 

The interim financial statements have been prepared in accordance with applicable accounting standards (IFRS) and under the historical cost convention. The interim financial statements do not constitute statutory financial statements in accordance with section 240 of the Companies Act 1985. The full year figures in this report are derived from the statutory accounts on which the auditors gave an unmodified report. The group's statutory financial statements prepared under International Financial Reporting standards (IFRS) have been filed with the Registrar of Companies.

The principal accounting policies of the group remained unchanged from those set out in the group's 2008 annual report and financial statements.

The interim financial statements have been reviewed by the company's auditor. A copy of the auditor's review report is attached to this interim report.

The interim financial statements were approved by the board of directors on 24 November 2008.

 

2 Segmental reporting

The Group's primary reporting format is business segments and its secondary format is geographical segments.

The reporting segments are as follows:

Conntinuing operations		Six Months ended 30 September 2008
	Online marketing & media			Direct marketing services			Data services & consultancy			Unallocated				Group Total
		£'000			£'000			£'000			£'000			£'000
Revenue		12,901			6,733			7,806			(965)			26,475
Direct costs		(6,022)			(1,380)			(1,318)			965			(7,755)
Gross profit		6,879			5,353			6,488			-			18,720
Other operating income		137			-			-			-			137
Operating expenses excluding depreciation, amortisation and charges for share options		(5,151)			(4,384)			(4,720)			(753)			(15,008)
Operating profit before depreciation, amortisation and charges for share options		1,865			969			1,768			(753)			3,849
Depreciation		(135)			(116)			(57)			(1)			(309)
Operating profit before amortisation and charges for share options		1,730			853			1,711			(754)			3,540
Amortisation		(322)			(167)			(269)			-			(758)
Charges for share options (see note 9)		(154)			(133)			(465)			(858)			(1,610)
Operating profit		1,254			553			977			(1,612)			1,172
Finance income														145
Finance costs														(319)
Profit before tax														998
Taxation														(667)
Profit for period from continuing operations														331

2 Segmental reporting (continued)
Continuing operations		Six Months ended 30 September 2007
	Online marketing & media			Direct marketing services			Data services & consultancy			Unallocated				Group Total
		£'000			£'000			£'000			£'000			£'000
Revenue		8,799			7,286			6,978			(925)			22,138
Direct costs		(4,783)			(1,764)			(1,748)			925			(7,370)
Gross profit		4,016			5,522			5,230			-			14,768
Other operating income		-			-			16			-			16
Operating expenses excluding depreciation, amortisation and charges for share options		(2,875)			(4,334)			(4,132)			(380)			(11,721)
Operating profit before depreciation, amortisation and charges for share options		1,141			1,188			1,114			(380)			3,063
Depreciation		(83)			(97)			(73)			(1)			(254)
Operating profit before amortisation and charges for share options		1,058			1,091			1,041			(381)			2,809
Amortisation		(217)			(162)			(269)			-			(648)
Charges for share options		(103)			(132)			(209)			(563)			(1,007)
Operating profit		738			797			563			(944)			1,154
Finance income														64
Finance costs														(380)
Profit before tax														838
Taxation														(301)
Profit for period from continuing operations														537

  

3 Taxation
	Period ended		Period ended		Year ended
	30 Sept 2008		30 Sept 2007		31 March 2008
		£'000		£'000		£'000
Recognised in the consolidated income statement:
Current period tax		881		691		1,670
Deferred tax credit
Origination and reversal of temporary timing differences		(214)		(390)		(657)
Total tax charge		667		301		1,013
Reconciliation of current period tax charge:
Profit before tax		998		838		2,149
Taxation using the UK Corporation Tax rate of 28% (2007 30%)		279		251		645
Effects of:
Non-deductible expenses		212		138		434
Share based payment charges		390		302		580
Timing differences		-		-		54
Prior year adjustment		-		-		(43)
Total current period tax charge		881		691		1,670

  

4 Earnings per share
	Period ended		Period ended		Year ended
	30 Sept 2008		30 Sept 2007		31 March 2008
From continuing operations		pence per share		pence per share		pence per share
Basic		0.50p		0.95p		1.79p
Diluted		0.40p		0.78p		1.44p
Earnings per share have been calculated by dividing the profit attributable to shareholders by the weighted average of ordinary shares in issue during the period. The calculations of basic and diluted earnings per share are:
	Period ended		Period ended		Year ended
	30 Sept 2008		30 Sept 2007		31 March 2008
		£'000		£'000		£'000
Profit for the period attributable to shareholders		331		537		1,136
Weighted average number of ordinary shares in issue:	Number '000		Number '000		Number '000
Basic		66,250		56,271		63,653
Adjustment for share options, warrants and contingent shares		15,807		12,764		15,222
Diluted		82,057		69,035		78,875
Adjusted earnings per share
	Period ended		Period ended		Year ended
	30 Sept 2008		30 Sept 2007		31 March 2008
From continuing operations		pence per share		pence per share		pence per share
Basic adjusted earnings per share		3.75p		3.20p		7.30p
Diluted adjusted earnings per share		3.03p		2.61p		5.89p
Adjusted earnings per share have been calculated by dividing the profit attributable to shareholders before amortisation and charges for share options by the weighted average of ordinary shares in issue during the period. The numbers used in calculating the basic and diluted adjusted earnings per share are reconciled below:
	Period ended		Period ended		Year ended
	30 Sept 2008		30 Sept 2007		31 March 2008
		£'000		£'000		£'000
Profit before tax		998		838		2,149
Amortisation		758		648		1,407
Charges for share options		1,610		1,006		2,758
Adjusted profit attributable to shareholders from continuing operations		3,366		2,492		6,314
Current period tax charge		(881)		(691)		(1,670)
		2,485		1,801		4,644

5 Bank overdraft, loans and borrowings
	30 Sept 2008		30 Sept 2007		31 March 2008
		£'000		£'000			£'000
Summary
Bank overdraft		8,976		4,603			6,901
Borrowings, undiscounted cash flows		4,828		6,727			5,834
		13,804		11,330			12,735
Borrowings are repayable as follows:
Within 1 year
Bank overdraft		8,976		4,603			6,901
Borrowings		2,131		1,560			1,453
Total due within 1 year		11,107		6,163			8,354
less future interest		(245)		(430)			(331)
Total due within 1 year		10,862		5,733			8,023
In more than 1 year but not more than 2 years		1,252		1,448			1,373
In more than 2 years but not more than 3 years		1,166		1,358			1,299
In more than 3 years but not more than 4 years		279		1,271			952
In more than 4 years but not more than 5 years		-		383			112
Over 5 years		-		707			645
Total due in more than 1 year		2,697		5,167			4,381
less future interest		(239)		(805)			(584)
Total due in more than 1 year		2,458		4,362			3,797
Average interest rates at the balance sheet date were:		%		%			%
Overdraft		7.25		7.75			7.50
Term loan		7.70		8.60			7.30
Mortgage		7.00		7.00			7.00
The borrowing facilities available to the Group at 30 September 2008 was £11.14 million (2007 £11.07m) and,
taking into account cash balances within the Group companies, there were £9.27 million (2007 £6.74m) of
available borrowing facilities.
A Composite Accounting System is set up with the Group's bankers, which allows debit balances on overdraft to
be offset across the Group with credit balances.

6 Financial derivatives
	30 Sept 2008		30 Sept 2007		31 March 2008
		£'000		£'000			£'000
Interest rate cap		155		-			195
In 2007 the Group purchased an interest rate cap of 6.19% for the period 2007 to 2012 for £4,000,000 of its
borrowings. This cap is designated a hedge of the interest expense relating to the Group loans. The contract
was marked to market at 30 September 2008 and there was a net liability of £155,000.

  

7	Contingent liabilities

Acquisitions made by the Group involved earn out agreements whereby the consideration payable included a deferred element of cash or shares or both which was contingent on the future financial performance of the acquired entity. As at 30 September 2008 all earn out liabilities have been settled. 

The maximum liability payable:

	30 Sept 2008		30 Sept 2007			31 March 2008
		£'000		£'000			£'000
In one year or less		-		-			1,600

8	Subsequent events

On 2 October 2008 the Group secured additional banking facilities of £4,000,000 through an increase in the existing revolving credit facility and an additional £2,000,000 term loan repayable over three years.

On 2 October 2008 the Group acquired all of the ordinary shares in Cybercom Group UK Limited for £6,000,000 cash. Deferred consideration of up to £3,000,000 is payable in cash and shares subject to Cybercom achieving certain performance criteria for the periods to 31 March 2009 and 31 March 2010. The provisional fair value of the net assets acquired is £1,042,300 and based upon the directors' best estimates the goodwill is expected to be £8,409,900.

On 2 October 2008 the Group acquired all of the ordinary shares in Gasbox Limited for £1,000,000 cash. Deferred consideration of up to £9,000,000 is payable in cash, options and shares subject to Gasbox achieving certain performance criteria for the periods to 31 March 2009 and 31 March 2010. The provisional fair value of the net assets acquired is £478,800 and based upon the directors' best estimates the goodwill is expected to be £853,500.

On 7 October 2008 the Group's subsidiary Alphanumeric Limited acquired all of the ordinary shares in Prodant Limited for £165,000 cash. Deferred consideration of up to £585,000 is payable in cash subject to Prodant achieving certain performance criteria for the periods to 31 March 2009 and 31 March 2010. The provisional fair value of the net assets acquired is £54,000 and based upon the directors' best estimates the goodwill is expected to be £407,300.

9	Accounting estimates and judgements

Impairment of goodwill

The carrying amount of goodwill is £39,249,000 (2007 £38,712,000). The directors are confident that the carrying amount of goodwill is fairly stated, and have carried out an impairment review within the last 12 months. 

Other intangible assets

The valuation of customer lists is based on key assumptions which the directors have assessed, and are satisfied that the carrying value of these assets is fairly stated.

Share-based payment

The share based payment charge consists of two charges.

A charge for the fair value at the date of grant of the share base remuneration calculated using a trinomial pricing model and various assumptions. In considering an appropriate charge, the directors commissioned an independent valuation from American Appraisal UK Limited and have fully adopted their findings and accordingly a charge of £1,389,000 has been made in the year (2007: £1,006,000).

The Group transferred the liability to settle the Employer's NI from the share option holder to the Group. As a result the Group has charged £221,000 in the period (2007: £nil) as an additional Share Based Payment charge. The future Employer's NI liability has been estimated and discounted over the 3 year period using a discount rate of 10%. 

Recognition of revenue as principal or agent

The Directors consider that they act as a principal in transactions where the Group assumes the credit risk. Where this is via an agency arrangement and the Group assumes the credit risk for all billings it therefore recognises gross billings as revenue.

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