K3 Business Technology Group Regulatory News (KBT)

12 Mar 2007 07:03

K3 Business Technology Group PLC12 March 2007 KBT.L K3 BUSINESS TECHNOLOGY GROUP PLC ("K3" or "the group") IT solutions supplier to the supply chain industry Announces Preliminary Results For the Year to 31 December 2006 Highlights • Excellent progress - demonstrates benefits of balanced business model • Period of consolidation and investment: - significant investment in Retail Software Division - recruitment lifts staff numbers to 134 from 95, a rise of 41% - integration of two manufacturing software businesses, IEG and Walton - will reduce cost base • Sales increased by 24% to £27.35m (2005: £22.03m) reflecting: - first full year contribution from IEG, manufacturing software business acquired June 2005 - strong growth at the Retail Software Division, where sales rose by 30% • Adjusted operating profit*1 rose by 27% to £3.05m (2005: £2.41m) • Operating profit, after amortisation of goodwill and intangibles of £2.20m and share option costs of £0.09m, was £0.76m (2005: £0.60m), a rise of 26% • Adjusted eps*2 was 11.5p (2005: 11.2p). Loss per share improved to 1.7p (2005: loss of 1.8p) • Post year end disposal of smallest business unit, Elucid for £1.36m cash • New business pipeline very encouraging - Board views outlook very positively Tom Milne, Chairman, commented, "The results for 2006 continue to demonstrate the strength of our balancedbusiness model. The Retail Software Division has shown strong sales growthwhilst the Manufacturing Software Division continues to demonstrate highlysustainable profitability*3 and strong cash generation. Having made three acquisitions during the 18 month period to June 2005, it wasimportant to ensure the businesses were effectively consolidated and that theRetail Software Division, in particular, remains well positioned for growth overthe next few years. Over the course of the year, we invested heavily in theDivision, adding new staff and reorganising the operations to concentrate oncore sectors. We continue to view the Group's prospects for 2007 very positively." ----------*1 Calculated before amortisation of goodwill and intangibles of £2.20m (2005:£1.75m) and share option costs of £0.09m (2005: £0.05m). *2 Calculated before amortisation of goodwill and intangibles of £2.20m (2005:£1.75m), share option costs of £0.09m (2005: £0.05m) and loss on disposal ofoperations including the related tax charge of £0.11m (2005: £0.14m).. *3 Calculated before amortisation of goodwill and intangibles of £1.16m (2005:£0.73m) and share option costs of £0.04m (2005: £0.03m). Enquiries: K3 Business Technology Andy Makeham, Chief Executive T: 020 7448 1000 (today)Group plc David Bolton, Chief Finance Officer Thereafter: 01282 864111 Biddicks Katie Tzouliadis T: 020 7448 1000 Paul Shackleton Daniel Stewart (NOMAD) T: 020 7776 6550 CHAIRMAN'S STATEMENT OVERVIEW Results for the year to 31 December 2006 show that K3 continues to makeexcellent progress. Group sales have increased by 24% to £27.35m and adjustedoperating profit*1 has risen by 27% to £3.05m. Over the year, our focus was on integration and investment. Having made threeacquisitions during the 18 month period to June 2005, it was important to ensurethe businesses were effectively consolidated and that the Retail SoftwareDivision, in particular, remains well positioned for growth over the next fewyears. We see a significant growth opportunity for the Retail Software businessand therefore over the course of the year invested heavily in the division,adding new staff and reorganising the operations to concentrate on core sectors.Our investment in new people has continued into the first half of the newfinancial year. Multi-channel retail is also an important growth sector for K3, and to date thishas predominantly been serviced by sales of our Elucid multi-channel retail solution. Elucid is not a Microsoft product, and is designed for the smaller multi-channel retailer, and this restricts the sales opportunities for the product. We have thus taken the decision to extend the functionality of our core Microsoft Dynamics Retail solution to incorporate the facilities previously offered by Elucid to provide an integrated and more scaleable solution with broader appeal. This development will fall largely in the first half of 2007 and is expected to yield revenues in the second half. The Elucid business unit has thus become non-core to the future of K3 and, in February 2007, we agreed the sale of Elucid for a total of £1.36m in cash. In the second half, we took the decision to merge both our manufacturingsoftware operations. This process should be completed by the end of the firsthalf of the current financial year. Our two core businesses, the Retail Software Division and the ManufacturingSoftware Division, form a solid base from which to move forward. Our strategyremains that of the balanced model. The Manufacturing Software Division offerssteady, recurring income and predictable profits*3 and cash flow generationwhile the Retail Software Division offers strong growth prospects. There are good opportunities for K3 looking ahead. We are the largest supplierof manufacturing software in the UK and there is scope to consolidate further inthis marketplace. We are also well placed to develop as the largest MicrosoftDynamics reseller. We continue to seek appropriate acquisitions that fulfil ourstrict criteria. In December 2006, we acquired a stake in SiRViS IT plc, the ITinfrastructure business, with a view to extending K3's product and serviceofferings. Unfortunately we were not able to agree terms which we considered tobe reasonable with the board of that company. We have therefore disposed of themajority of that stake, at the same price at which it was acquired. We willcontinue to consider other acquisition opportunities but only where K3'sshareholder value can be enhanced. This year, because of the investment we are making in the business in first halfof the new financial year, results for the year as a whole will be moresignificantly weighted towards the second half. The Board continues to remainvery positive about the outlook for 2007. ----------*1 Calculated before amortisation of goodwill and intangibles of £2.20m (2005:£1.75m) and share option costs of £0.09m (2005: £0.05m). *3 Calculated before amortisation of goodwill and intangibles of £1.16m (2005:£0.73m) and share option costs of £0.04m (2005: £0.03m). Financial Results Group turnover for the year to 31 December 2006 increased by 24% to £27.35m from£22.03m last year. The increase partly reflected the first full year'scontribution from Information Engineering, the manufacturing software businesswe acquired in June 2005. A comparison of second half results shows progress ona like-for-like basis and sales in the second half increased by 15% from £12.69mto £14.61m. This reflected the particularly strong growth in the Retail SoftwareDivision, where sales in the second half rose by 36%. Adjusted operating profit*1 for the year rose by 27% to £3.05m (2005: £2.41m).After amortisation of goodwill of £2.20m (2005: £1.75m) and share option costsin line with FRS20, Share-based payments, of £0.09m (2005: £0.05m), theoperating profit was £0.76m (2005: £0.60m), an increase of 26% on last year. Adjusted profit before tax*1 rose by 37% to £2.78m (2005: £2.03m) and adjustedearnings per share*2 were 11.5p (2005: 11.2p). Earnings per share growth wasimpacted by a fund raising in the second half. After taking into accountamortisation of goodwill and intangibles of £2.20m (2005: £1.75m) and shareoption costs of £0.09m (2005: £0.05m), profit before taxation more than doubledto £0.50m (2005: £0.23m) and the loss per share was 1.7p (2005: loss of 1.8p). At 31 December 2006, the Group held a cash balance of £2.27m (2005: £0.87m). Atthat date, the balance of the bank loan of £1m drawn down in December 2005 was£0.69m. ----------*1 Calculated before amortisation of goodwill and intangibles of £2.20m (2005:£1.75m) and share option costs of £0.09m (2005: £0.05m). *2 Calculated before amortisation of goodwill and intangibles of £2.20m (2005:£1.75m), share option costs of £0.09m (2005: £0.05m) and loss on disposal ofoperations including the related tax charge of £0.11m (2005: £0.14m). Dividend The Directors do not propose to pay a dividend (2005: £nil). However, as statedin the interim results, following the Company's successful application to theHigh Court for the requisite confirmation of the cancellation of the sharepremium account in July 2006, the Directors plan to make a dividend payment inrespect of the 2007 results if appropriate. International Financial Reporting Standards As reported in our interim results, the Group is required to adopt InternationalFinancial Reporting Standards (IFRS) for the year ended 31 December 2007. Aproject is currently in progress to identify the likely impact of IFRS upon theGroup's results. It is envisaged that this project, including the financialrestatement of previously reported results, will be completed during the firsthalf of 2007. One notable impact will be the removal of the requirement tosystematically amortise goodwill held within the balance sheet which willinstead be subject to an annual impairment review. Review of Operations Retail Software Business The division performed extremely well, with sales increasing by 30% over theyear to £16.44m from £12.66m last year and adjusted operating profit*4 rising by34% to £1.63m (2005: £1.22m). Sales in the second half of the year wereparticularly strong, increasing by 36% to £8.65m from £6.36m in same period in2005. This excellent performance reflects both our additional investment in thedivision and our strategy to focus on building our presence within key retailsectors, our 'verticalisation strategy'. Over the course of 2006, we secured neworders amounting to £8.60m (2005: £7.53m). Our investment over the year in the division has been significant andencompassed product development, business development and sales and marketing.While the investment is already showing returns, as expected, it impacted onmargins in the second half. We are making further investment in the division inthe first half of the current financial year and are particularly encouraged bythe strength of the new business pipeline. ----------*4 Calculated before amortisation of goodwill and intangibles of £0.95m (2005:£0.95m) and share option costs of £0.03m (2005: £0.02m). Distribution Software Business The Distribution Software Division, based on our Elucid product, continued toshow good progress in 2006 with revenues growing by 14% to £2.06m (2005:£1.80m). Last year's adjusted operating loss*5 of £0.08m was converted into anadjusted operating profit*5 of £0.08m, reflecting continued improvement inmargins and productivity. During the course of 2006, we took the strategic decision to dispose of theElucid business in order to concentrate on multi-channel and warehousemanagement software sales opportunities for larger retail customers. This isbetter serviced by our Microsoft Dynamics based retail solution rather than the'stand-alone' Elucid product. We are therefore extending the functionality ofour Microsoft Dynamics offering to create an integrated solution for the midrange retailer and, in February 2007, agreed the sale of Elucid to SandersonGroup plc for £1.36m in cash. ----------*5 Calculated before amortisation of goodwill and intangibles of £0.09m (2005:£0.08m) and share option costs of £0.01m (2005: £0.01m). Manufacturing Software Business Revenues from our Manufacturing Software Division increased by 17% to £8.85m(2005: £7.57m). This reflected the first full year contribution from InformationEngineering, which we acquired in June 2005. Sales in the second half of theyear declined slightly to £4.90m (2005: £5.33m), largely the result of somereduction in the new business sales at the Walton-based business. Adjustedoperating profit*6 for the year increased by 6% to £1.34m (2005: £1.27m) In thesecond half adjusted operating profit*7 rose by 39% to £1.03m (2005: £0.74m)reflecting the impact of the annual licence fee billings. Since the year end, we have taken the decision to channel all our new businesssales of SYSPRO through Information Engineering, and have also taken theopportunity to bring our two manufacturing software businesses closer togetherand reduce the cost base accordingly. We are encouraged by the pipeline and view the prospects for 2007 withconfidence. ----------*6 Calculated before amortisation of goodwill and intangibles of £1.16m(2005: £0.73m) and share option costs of £0.04m (2005: £0.03m). *7 Calculated before amortisation of goodwill and intangibles of £0.57m (2005:£0.56m) and share option costs of £0.02m (2005: £0.02m). Outlook The results for 2006 continue to demonstrate the strength of our balancedbusiness model. The Retail Software Division has shown strong sales growthwhilst the Manufacturing Software Division continues to demonstrate highlysustainable profitability and strong cash generation. Having spent the last yearsuccessfully integrating and consolidating the acquired businesses, we are nowactively seeking further complementary acquisitions in our core markets tocontinue to build critical mass. We continue to view the Group's prospects for 2007 very positively. Tom MilneChairman OPERATING REVIEW Introduction 2006 was a year of consolidation and investment following two key acquisitionsand a smaller acquisition made over the course of eighteen months from April2004. Results for the year are excellent, with revenues growing by 24% to £27.35m(2005: £22.03m) and adjusted operating profits*8 increasing by 27% to £3.05m(2005: £2.41m). While part of this was due to the full year benefit ofInformation Engineering acquired in June 2005, it is encouraging to note thatthe like-for-like revenues in the second half showed growth of 15% to £14.61m(2005: £12.69m) while like-for-like adjusted operating profit*9 rose by 10% to£1.71m (2005: £1.55m). This is a particularly encouraging performance taking into account the level ofinvestment we have made in our Retail Software Division, with the creation ofnew vertical market business units. It confirms the strength of ourwell-balanced business model which delivers a mix of safe recurring licenceincome in the Manufacturing Software Division and high growth opportunities inRetail Software Division. As part of our consolidation process, in February 2007, we agreed the sale of our Distribution Software Business, Elucid, which we viewed as no longer core toour future strategy. Going forward, we intend to focus on the mid-tier retail sector and our Microsoft Dynamics solution will encompass a multi-channel and warehouse management offering for this marketplace. We continue to pursue our goal to become the UK's market leading supplier of Microsoft-based supply chain management solutions to small and medium sized companies. In 2007, we expect to expand our footprint within the Retail and Manufacturing software sectors. We have also identified potential acquisition targets in both the manufacturing and retail markets which would complement our existing offerings for these sectors. The Board considers the key performance indicators by which it measures performance of its divisions to be turnover and operating profit adjusted for goodwill amortisation and share option costs. ----------*8 Calculated before amortisation of goodwill and intangibles of £2.20m (2005:£1.75m) and share option costs of £0.09m (2005: £0.05m). *9 Calculated before amortisation of goodwill and intangibles of £1.09m (2005:£1.07m) and share option costs of £0.05m (2005: £0.04m). Retail Software Business 2006 was another year of dramatic growth. In early 2006, we embarked on aprogramme of 'verticalisation' whereby we refocused our activities toconcentrate on sectors where we can build a significant presence. We now havesector specific business units in Breweries/Drinks, Food, Household Goods andFashion. This has required significant investment, predominantly in additionalhigh calibre resource, but also in marketing to underpin the excitingopportunities we believe are available to us. I am pleased to say that theinitial results from this investment are encouraging. Whilst revenues grew by 30%, year on year, sales in the second half increased by36% over the same period last year. All new vertical units contributed and atotal of 18 new customers were signed with an average order value of £0.48m.Notable new customers included Beales Department Store, US-based GameStop Corp.,one of the world's largest video game retailers (with an implementation spanningthe UK, USA and Pacific Rim), and Musgrave Group, Ireland's largest food andgrocery distributor. Adjusted operating profits*10 for the year grew by 34% to £1.63m (2005: £1.22m).However our increased investment adversely impacted on the underlying margin atthe adjusted operating profit*11 level in the second half which was 7% comparedto 12% in the same period in 2005. As a result of our investment, the number of people employed in our RetailSoftware Division increased from 95 to 134 during 2006. We have been extremelyfortunate in being able to attract some very high calibre staff and this willhelp to underpin our future growth plans. We are committing further investmentover the first half of the new financial year. Our product development roadmap for 2007 includes the continued development ofmid-range multi-channel functionality, for which we already have customersidentified. Revenues from these projects should start to flow during the secondhalf of 2007. ----------*10 Calculated before amortisation of goodwill and intangibles of £0.95m (2005:£0.95m) and share option costs of £0.03m (2005: £0.02m). *11 Calculated before amortisation of goodwill and intangibles of £0.47m (2005:£0.48m) and share option costs of £0.02m (2005: £0.01m). Distribution Software Business Revenues grew by 14% to £2.06m (2005: £1.80m) and improved margins andconsultancy productivity helped the business deliver an adjusted operatingprofit*12 for the year of £0.08m (2005: adjusted operating loss*12 of £0.08m). The sale of the business in February 2007 allows us to focus on the largercustomer opportunities within the retail space whilst using the funds receivedto invest in further acquisition opportunities. ----------*12 Calculated before amortisation of goodwill and intangibles of £0.09m(2005: £0.08m) and share option costs of £0.01m (2005: £0.01m). Manufacturing Software Business The acquisition of Information Engineering in 2005 brought with it distributionrights for SYSPRO, one of the world's market leading manufacturing EnterpriseResource Planning solutions. SYSPRO provides a compelling new business productas well as offering a natural upgrade solution for our existing customers. The programme to migrate existing long term manufacturing customers to SYSPROstarted well, with three major upgrades achieved in the year (MicroFiltex, GMIand SMC), and we remain hopeful of this momentum continuing in 2007. Over thecourse of the year, we secured a total of 14 new SYSPRO deals worth £1.34m.These included Avio Import S.p.A,, the Italian distributor of aerospacefasteners, and Radical Motorsport, the UK racing car manufacturer. The success of our 13 site implementation for the Doncaster Group led to asecond order worth £0.5m for SYSPRO Business Analytics, a new 'businessintelligence' software module that is proving much in demand from both new andexisting customers. 2006 also saw the development of a new SYSPRO Mobile Technology solution,written by Information Engineering, using the latest Visual Studio developmenttools. This was successfully trialled in the UK and is now being distributedthroughout Syspro's worldwide distributor network. Early results are encouragingwith three sales in the UK, and 25 sales in Canada to date. We have now decided to focus all new business sales of SYSPRO from InformationEngineering, and the cost base of our Walton business unit has been reduced asduplicate sales and marketing has been eliminated. With Microsoft's support, our Walton business unit developed a multi-currencyadd-on module for Microsoft CRM, and distributors for this have now beenappointed in the USA, Australia, Poland, Belgium, Denmark, and Germany. K3 remain the largest supplier of manufacturing solutions to the SME market inthe UK, and with our newly invigorated manufacturing division, market leadingproducts, substantial customer base and strong pipeline, we believe 2007 willdeliver another strong performance. Andy MakehamChief Executive Consolidated profit and loss accountfor the year ended 31 December 2006 2006 2005 As restated Continuing Continuing Notes £000 £000Turnover 27,346 22,029 Cost of sales (10,641) (8,136)----------------------------- ------- -------- ---------Gross profit 16,706 13,893 Selling and distribution costs (5,102) (4,122)Administrative expenses (10,840) (9,167)----------------------------- ------- -------- -------------------------------------- ------- -------- ---------Operating profit before amortisation ofgoodwill and intangibles and share option costs 3,046 2,408Amortisation of goodwill and intangibles (2,198) (1,752)Share option costs (85) (52)----------------------------- ------- -------- --------- Operating profit 763 604 Loss on disposal of operations 1 - (90) -------- ---------Profit on ordinary activities before financecharges 763 514Finance charges (net) (262) (287)----------------------------- ------- -------- --------- Profit on ordinary activities before taxation 501 227Tax on profit on ordinary activities (810) (493)----------------------------- ------- -------- ---------Loss for financial year 5 (309) (266)----------------------------- ------- -------- --------- Loss per share Total TotalBasic 2 (1.7p) (1.8p)Diluted 2 (1.7p) (1.8p) All activities arise from continuing activities apart from the loss on disposalof operations. Consolidated balance sheetas at 31 December 2006 2006 2005 As restated Notes £000 £000Fixed assetsDevelopment costs and intellectual property 273 162Goodwill 13,604 15,682------------------------------ ------- -------- --------Intangible fixed assets 13,877 15,844Tangible assets 416 508Investments 1,398 ------------------------------- ------- -------- -------- 15,691 16,352------------------------------ ------- -------- --------Current assetsDebtors 8,778 6,596Cash at bank and in hand 2,267 874------------------------------ ------- -------- -------- 11,045 7,470Creditors: amounts falling due within one year 3 (13,654) (10,583)------------------------------ ------- -------- --------Net current liabilities (2,609) (3,113)------------------------------ ------- -------- -------- Total assets less current liabilities 13,082 13,239 Creditors: amounts falling due after more thanone year 4 (711) (2,439)------------------------------ ------- -------- --------Net assets 12,371 10,800------------------------------ ------- -------- -------- Capital and reservesCalled up share capital 4,872 4,435Share premium account 5 1,388 7,813Other reserve 5 6,070 6,070Profit and loss account 5 41 (7,518)------------------------------ ------- -------- --------Equity shareholders' funds 12,371 10,800------------------------------ ------- -------- -------- Consolidated cash flow statementfor the year ended 31 December 2006 2006 2005 Notes £000 £000Net cash inflow from operating activities 6 2,218 4,267Returns on investments and servicing of finance (235) (279)Taxation 26 (80)Capital expenditure and financial investment (335) (106)Acquisitions and disposals 7 (1,456) (5,153)------------------------------ ------- -------- --------Cash inflow (outflow) before financing 218 (1,351)Financing 7 1,175 1,822------------------------------ ------- -------- --------Increase in cash in the year 8 1,393 471------------------------------ ------- -------- -------- Notes 1. Loss on disposal of operations The loss on disposal of operations in 2005 of £0.09m relates to furtherunanticipated costs incurred regarding the disposal in 2004 of the manufacturingsoftware operation based at Crewe to Azur Group Limited. The profit on disposalof this operation recognised in 2004 was £1.25m. During the year a further taxcharge of £0.11m has been made as a result of a reduction in the capital lossesavailable to be offset against the gain made on the disposal of this operation. 2. Loss (earnings) per share The calculations of loss per share are based on the loss for the financial yearand the following numbers of shares. 2006 2005 Number of Number of shares sharesWeighted average number of shares:For basic earnings per share 18,075,153 14,999,027Exercise of share options 87,053 154,501 ----------- -----------For diluted earnings per share 18,162,206 15,153,528 =========== =========== The alternative earnings per share calculations have been computed because thedirectors consider that they are useful to shareholders and investors. Thesewere based on the following profits (losses) and the above number of shares. 2006 2005 Earnings Per share Earnings Per share Per share (losses) amount (losses) amount amount Basic and As restated Basic Diluted diluted As restated As restated £000 p £000 P pEarnings(loss) pershare (eps) (309) (1.7) (266) (1.8) (1.8)Effect ofgoodwillamortisationandintangibles 2,198 12.1 1,752 11.7 11.6Effect ofshare optioncosts 85 0.5 52 0.4 0.4-------------------- -------- -------- -------- -------- --------Eps beforeamortisationof goodwillandintangiblesand shareoption costs 1,974 10.9 1,538 10.3 10.2Exceptionalitems (net oftax) 106 0.6 *+140 0.9 0.9-------------------- -------- -------- -------- -------- --------Eps beforeamortisationof goodwillandintangibles,share optioncosts andexceptionalitems 2,080 11.5 1,678 11.2 11.1-------------------- -------- -------- -------- -------- -------- *+ Relates to loss on disposal of manufacturing software operation based inCrewe of £nil (2005: £0.09m) on which the tax charge was £0.11m (2005: £0.05m)due to adjustments to the amounts of capital losses available for offset againstthe gain. 3. Creditors: amounts falling due within one year 2006 2005 £000 £000Bank loans and overdrafts 335 311Obligations under finance leases and hire purchase contracts 129 249Other loans due to related parties 397 229Trade creditors 1,676 1,221Corporation tax 1,003 223Taxation and social security 1,626 1,536Other creditors 80 262Deferred consideration 960 70Accruals 2,907 2,308Deferred income 4,541 4,174----------------------------------- -------- -------- 13,654 10,583----------------------------------- -------- -------- 4. Creditors: amounts falling due after more than one year 2006 2005 £000 £000Bank loan and overdrafts 356 689Obligations under finance leases and hire purchase contracts 98 130Other loans due to related parties 257 513Deferred consideration - 1,107----------------------------------- -------- -------- 711 2,439----------------------------------- -------- -------- 5. Reserves Share premium Other reserve Profit and loss account account £000 £000 £000----------------------------- -------- -------- --------At 1 January2006 - asrestated 7,813 6,070 (7,518)Cancellationof sharepremiumaccount (7,813) - 7,813Retained lossfor the year - - (309)Currencytranslationdifference onforeigncurrency netinvestments - - (15)Credit toequity forequity-settledshare-basedpayments - - 85Treasurysharesacquired - - (15) Share capitalissued 1,419 - -Expenses ofequity shareissue (31) - ------------------------------ -------- -------- --------At 31 December 2006 1,388 6,070 41----------------------------- -------- -------- -------- Following the Company's successful application to the High Court for therequisite confirmation of the cancellation of the share premium account in July2006, the balance on the share premium account at that date was cancelled. The group has adopted FRS 20, Share based payments. In accordance with thetransitional provisions of FRS 20, the standard was applied retrospectively toall grants of equity instruments after 7 November 2002 that were unvested as of1 January 2005, and to liabilities for share-based transactions existing at 1January 2005. For 2005, the change in accounting policy has resulted in net decrease in profitfor the year of £83,000. For 2006 the impact of share base payments is a netcharge of £85,000, which is included in the administrative expenses line of theconsolidated profit and loss account. 6. Reconciliation of operating profit to operating cash flow 2006 2005 £000 £000Operating profit 763 604Depreciation charges and fixed asset impairment 329 341(Profit) loss on sale of tangible fixed assets (27) 33Amortisation of goodwill and intangibles 2,198 1,752Share options 85 52Write down of investments - 17(Increase) decrease in debtors (2,276) 1,372Increase in creditors 1,146 96----------------------------------- -------- --------Net cash inflow from operating activities 2,218 4,267----------------------------------- -------- -------- 7. Analysis of cash flows Acquisitions and disposals 2006 2005 £000 £000Acquisition of subsidiary undertakings - (1,663)Costs of acquisition of subsidiary undertakings (18) (696)Net bank overdrafts acquired with subsidiary undertakings - (1,016)Deferred consideration (40) (1,688)Sale of business (net of costs) - (90)Acquisition of investment (1,398) ------------------------------------ -------- -------- (1,456) (5,153)----------------------------------- -------- -------- FinancingIssue of ordinary share capital 1,825 1,350Treasury shares purchased (15) (20)New bank loan - 1,000New related party loan - 1,000Repayment of bank loan (309) -Repayment of related party loans (70) (1,040)Capital element of finance lease rental payments (256) (468)----------------------------------- -------- -------- 1,175 1,822----------------------------------- -------- -------- 8. Analysis and reconciliation of net debt 1 Jan 2006 Cash flow Other non-cash 31 Dec 2006 changes £000 £000 £000 £000Cash in hand, at bank 874 1,393 - 2,267Debt due after one year (1,202) - 589 (613)Debt due within one year (540) 397 (589) (732)Finance leases (379) 256 (104) (227)---------------------- -------- -------- --------- --------Cash resources (net debt) (1,247) 2,046 (104) 695---------------------- -------- -------- --------- -------- 2006 2005 £000 £000Increase in cash in the year 1,393 471 Cash outflow (inflow) from increase/decrease in debt andlease financing 653 (492)----------------------------------- -------- --------Change in net debt resulting from cash flows 2,046 (21)Finance leases acquired with subsidiaries - (92)Loan converted to equity - 521New finance leases (104) (88)----------------------------------- -------- --------Movement in net debt in year 1,942 320Net debt at 1 January 2006 (1,247) (1,567)----------------------------------- -------- --------Cash resources (net debt) at 31 December 2006 695 (1,247)----------------------------------- -------- -------- 9. The directors do not recommend the payment of a final dividend and the dividend for the year is therefore £nil (2005: £nil). 10. The results have been prepared under the historical cost convention and in accordance with applicable United Kingdom accounting standards. The accounting policies have been applied consistently with those stated in the previous accounts. 11. The financial information set out above does not comprise the Company's statutory accounts. Statutory accounts for the previous financial year ended 31December 2005 have been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain any statement undersection 237(2) or (3) of the Companies Act 1985. The auditors have given an unqualified opinion on the accounts for the year ended 31 December 2006 and it did not contain any statement under section 237(2) or (3) of the Companies Act 1985. These will be delivered to the Registrar of Companies following the annualgeneral meeting. 12. This preliminary announcement was approved by the Board of directors on 12 March 2007. 13. The full financial statements will be posted to shareholders on or around 27April 2007. Further copies will also be available from the Company's registered office at Linden Business Centre, Linden Road, Colne, Lancashire, BB8 9BA from that date. This information is provided by RNS The company news service from the London Stock Exchange