MOGP.L Regulatory News (MOGP)

Press Release 

29 June 2009

Total revenue of £17.44 million

Profit before tax of £1.36 million

Strong cash position of £2.0 million

Joined the London AIM market in November 2008

Subsidiary company Mountfield Building Group has won a £1.2 million data centre contract with a major telecommunications firm

Mountfield Group plc

Peter Jay, Executive Chairman

Tel: +44 (0) 20 7398 7718

Graham Read, Chief Executive Officer

www.mountfieldgroupplc.com

Daniel Stewart & Company Plc

Paul Shackleton / Oliver Rigby

Tel: +44 (0) 20 7776 6550

oliverr@danielstewart.co.uk

www.danielstewart.co.uk

Abchurch

Charlie Jack / Stephanie Cuthbert

Tel: +44 (0) 20 7398 7718

stephanie.cuthbert@abchurch-group.com

www.abchurch-group.com

Peter Jay

Executive Chairman

29 June 2009

Graham Read

Chief Executive Officer

29 June 2009

All amounts relate to continuing operations.

As permitted by Section 230 of the Companies act 1985, no separate Income Statement is presented in respect of Mountfield Group Plc. Its loss for the period from 16 October 2008 to 31 December 2008 year was £192,494 (2007 - £nil)

2008

2007

Notes

£'000

£'000

ASSETS

Non-current assets

Intangible assets

6

15,816,529

-

Property, plant and equipment

7

193,349

112,387

16,009,878

112,387

Current assets

Inventories

8

135,480

-

Trade and other receivables

9

4,328,004

2,529,837

Cash and cash equivalents

10

2,178,667

3,494

6,642,151

2,533,331

TOTAL ASSETS

22,652,029

2,645,718

EQUITY AND LIABILITIES

Share capital and reserves

Issued share capital

11

169,558

100

Share premium

318,499

-

Other reserves

52,357

-

Merger reserve 

12,951,180

-

Reverse acquisition reserve

(2,856,755)

-

Retained earnings

1,349,909

177,042

TOTAL EQUITY

11,984,748

177,142

Current liabilities

Trade and other payables

12

4,317,056

2,384,190

Short-term borrowings

12

170,325

60,467

Finance lease liabilities

12

6,920

8,394

Income tax

731,630

-

5,225,931

2,453,051

Non-current liabilities

Loan notes

13

5,419,737

-

Finance lease liabilities

13

10,079

15,525

Provision for deferred taxation

14

11,534

-

TOTAL LIABILITIES

10,667,281

2,468,576

TOTAL EQUITY AND LIABILITIES

22,652,029

2,645,718

2008

2007

Notes

£'000

£'000

Cash flows from operating activities

Profit from operations before interest and tax

1,374,315

1,200,157

Adjusted for:

Depreciation of property, plant and equipment

18,776

12,767

Share based reserve

52,357

-

Negative goodwill 

(126,308)

-

Decrease in inventories

243

-

Decrease/(increase) in receivables

1,107,589

(46,087)

Decrease in payables

(1,068,193)

(746,923)

Cash generated by operations

1,358,779

419,914

Finance costs

(8,106)

(11,556)

Finance income

40,679

2,294

Taxation paid

(99,969)

-

Net cash inflow from operating activities

1,291,383

410,652

Cash flows from investing activities

Purchase of equipment

(8,671)

(28,029)

Costs of acquisition

(783,817)

-

Cash acquired on acquisition

1,653,603

-

Net cash inflow/(outflow) from investing activities

861,115

(28,029)

Cash flows from financing activities

Finance lease rentals

(6,920)

14,839

Repayment of loans 

(140,730)

(18,044)

Net cash flows used in financing activities

(147,650)

(3,205)

Net increase in cash and cash equivalents

2,004,848

379,418

Cash and cash equivalents brought forward

3,494

(375,924)

Cash and cash equivalents carried forward

10

2,008,342

3,494

Share capital

Share premium

Other reserves

Reverse acquisition reserve

Merger reserve

Retained earnings

Total

£

£

£

£

£

£

£

At 1 January 2007

100

-

-

-

-

(1,013,853)

(1,013,753)

Profit for the period

-

-

-

-

-

1,190,895

1,190,895

At 31 December 2007

100

-

-

-

-

177,042

177,142

Shares issued in period for cash

38,738

318,499

-

-

-

-

357,237

Shares issued on acquisition

130,820

-

-

12,951,180

-

13,082,000

Reverse acquisition

(100)

-

-

(2,856,855)

-

-

(2,856,955)

Share based payments

-

52,357

-

52,357

Profit for the period

-

-

-

-

-

1,172,867

1,172,867

At 31 December 2008

169,558

318,499

52,357

(2,856,855)

12,951,180

1,349,909

11,984,648

1.1

Basis of preparation

Acre 1124 Limited was incorporated on 18 September 2007 in England and Wales under the Companies Act 1985.

On 9 September 2008, Acre 1124 Limited changed its name to Mountfield Group Limited and on 23 October 2008 it re-registered as Mountfield Group plc ("the Company").

The registered number of the Company is 06374598.

The address of its registered office is 3C Sopwith Crescent, Wickford Business Park, Wickford, Essex SS11 8YU.

1.2

First time adoption of International Financial Reporting Standards (IFRS)

These financial statements have been prepared in accordance with International Financial Reporting Standard as adopted by the European Union and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS. 

The adoption of these standards has not resulted in any changes to the Group's accounting policies and have not affected amounts reported in prior years.

The financial statements have been prepared under the historical cost convention and a summary of the more important accounting policies is set out below. 

1.3

Significant accounting judgements and sources of estimation uncertainty

The preparation of financial statements under IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Estimates and assumptions are reviewed on an ongoing basis and any revision to estimates or assumptions are recognised in the period in which they are revised and in future periods affected. 

Goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which the goodwill has been allocated. The value in use calculation requires the Company to estimate future cashflows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The carrying amount of goodwill at the balance sheet date was £15.8 million. Details regarding the goodwill carrying value and assumptions used in carrying out the impairment reviews are provided in note 6.

Accounting for construction contracts

In accordance with IAS 11 "Construction Contracts", management is required to estimate total expected contract costs and the percentage of contract completion in determining the appropriate revenue and profit to recognise in the period. The Group uses the work of expert professional Chartered Surveyors to determine accurately the level of work that has been completed by the year-end. 

1.4

Presentational and functional currency

This financial information is presented in pounds sterling, which is the Group's functional currency.

1.5

Adoption of pronouncements by the IASB and IFRIC

At the date of authorisation of these financial statements the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective: 

International Accounting Standards (IAS/IFRSs)

IFRS 2

Amendment to Share-based Payments: Vesting Conditions and Cancellations

IFRS 3 

Business Combinations (revised 2008)

IFRS 5

Non-Current Assets Held for Sale and Discontinued Operations (revised May 2008)

IFRS 8 

Operating Segments

IAS 1

Presentation of Financial Statements (revised 2007 and 2008) 

IAS 16

Property, Plant and Equipment (revised 2008)

IAS 19

Employee benefits (revised 2008)

IAS 20

Government Grants and Disclosure of Government Assistance (revised 2008)

IAS 23

Borrowing Costs (revised 2007 and 2008)

IAS 27

Consolidated and Separate Financial Statements (revised 2008)

IAS 28

Investments in Associates (revised 2008)

IAS 31 

Investments in Joint Ventures (revised 2008)

IAS 32

Financial Instruments: Presentation (revised 2008)

IAS 36

Impairment of Assets

IAS 38

Intangible Assets

IAS 39

Financial Instruments: Recognition and Measurement (revised 2008)

International Financial Reporting Interpretations Committee (IFRIC)

IFRIC 15

Agreements for the Construction of Real Estate

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the Group's financial statements.

1.6

Basis of consolidation

Subsidiaries

The Group financial statements consolidate the financial statements of the Company and all its subsidiaries. Subsidiaries include all entities over which the Group has the power to govern financial and operating policies. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated from the date on which control commences until the date that control ceases. Intra-group transactions are eliminated in preparing the Consolidated Financial Statements. 

A list of the significant investments in subsidiaries, including the name, country of incorporation and proportion of ownership interest is given in the note 2 to the Company's separate financial statements. 

Business combinations and goodwill

On 16 October 2008, Mountfield Group Plc acquired the entire issued share capital of Mountfield Building Group Limited, which has one wholly owned subsidiary, MBG Construction Limited (the "MBG Group") acquired in August 2008. The consideration of £7,622,000 was satisfied by the issue of 51,220,000 Ordinary Shares of 0.1p each at a price of 10p per share and by the issue of £2,500,000 unsecured non-convertible loan notes.

As a result of these transactions, the former shareholders of MBG Group became the majority shareholders in the Company. Accordingly, the substance of the transaction was that MBG Group acquired the Company in a reverse acquisition. 

Under IFRS 3 'Business Combinations', the acquisition of MBG Group has been accounted for as a reverse acquisition. As a consequence of applying reverse acquisition accounting, the results for the period ended 31 December 2008 comprise those of Mountfield Building Group Limited plus those of the Company and other acquired entities from 16 October 2008.

The comparative figures are those of Mountfield Building Group Limited for the year ended 31 December 2007. The Consolidated balance sheet comprises the combined balances of MBG Group, the Company at 31 December 2008, together with those of acquired entities mentioned below. The comparative Consolidated balance sheet is that of Mountfield Building Group Limited alone at 31 December 2007. 

The acquisitions of Connaught Access Flooring Limited, MBG Construction Limited and Mountfield Land Limited are accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree plus any costs directly attributable to the business combination. 

Goodwill

Goodwill on acquisition of subsidiaries represents the excess of the cost of acquisition over the fair value of the Group's share of the net identifiable assets and contingent liabilities acquired. Identifiable assets are those which can be sold separately or which arise from legal rights regardless of whether those rights are separable. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is not amortised but tested annually for impairment or when trigger events occur, and is carried at cost less accumulated impairment losses.

1.7

Revenue recognition

Revenue is stated exclusive of VAT and consists of sales of services to third parties. 

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Retentions are recognised throughout the life of a contract and are deducted from the sales invoice.

Revenue relating to contracts includes the amount initially agreed in the contract plus any variations in contract work and incentive payments to the extent that it is probable they will result in revenue and can be reliably measured. As soon as the outcome of the contract can be measured reliably, revenue and expense is recognised in the income statement on a stage of completion basis. The stage of completion is determined by reference to a survey of work performed. Any losses are recognised immediately in the income statement as soon as they are foreseen.

1.8

Contract work in progress

Revenue from fixed price construction contracts is recognised on the percentage of completion method, measured by reference to the percentage of contract costs incurred for work performed to date to the estimated total contract costs or the proportion of the value of work done to the total value of work under the contract, except where these would not be representative of the stage of completion. Full provision is made for all known or expected losses on individual contracts immediately once such losses are foreseen.

1.9

Amounts recoverable on long term contracts

Profit on long term contracts is taken as the work is carried out if the final outcome can be assessed with reasonable certainty. The profit included is calculated on a prudent basis to reflect the proportion of the work carried out at the year end, by recording turnover and related costs as contract activity progresses. Turnover is calculated as that proportion of total contract value which costs incurred to date bear to total expected costs for that contract. Revenues derived from variations on contracts are recognised only when they have been accepted by the customer. Full provision is made for losses on all contracts in the year in which they are first foreseen.

Amounts which are recoverable on long-term contracts are shown within debtors under the heading 'Amounts Recoverable on Contracts' which have not yet been invoiced and are stated net of discounts allowed.

1.10

Segmental reporting

A business segment is a group of assets and operations engaged in providing services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing services within a particular economic environment that are subject to risks and returns that are different from those of segments operations in other economic environments. 

The Group operates in one geographical segment, the UK. It operates in a very narrow segment of construction and fit-out of data centres for the IT industry. As such, the Directors do not consider that there is any segmental analysis required.

1.11

Share-based payments

The Consolidated financial statements account for share-based payments for compensation of goods or services received based on their fair value.

The cost of granting share-based payments is recognised through the income statement. The fair value is determined based upon invoices received in respect of such services and on current expectations of the shares to be issued.

The Group makes equity-settled share-based payments to its employees and directors. The fair value of options and warrants granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options and warrants granted is measured based on the Black- Scholes framework, taking into account the terms and conditions upon which the instruments were granted. At each balance sheet date, the Company revises its estimate of the number of options and warrants that are expected to become exercisable.

1.12

Impairment

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

1.13

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation.

Property, plant and equipment is depreciated over the estimated useful life of the asset, as follows:

Freehold buildings and leasehold improvements

2% - 10% per annum straight line

Fixtures, fittings and equipment

10% per annum reducing balance

Plant and Equipment

20% - 25% per annum straight line

Motor vehicles

20% - 25% per annum straight line

1.14

Leasing

A lease is classified as a finance lease if it transfers substantially all the risks and rewards of ownership. All other leases are classified as operating leases. Classification is made at the inception of the lease.

Assets obtained under finance leases are capitalised as property, plant and equipment and depreciated over the shorter of the lease term and their useful lives. Obligations under such arrangements are included in creditors net of the finance charge allocated to future periods. The finance element of the rental payment is charged to the profit and loss account so as to produce constant periodic rates of charge on the net obligations outstanding in each period.

1.15

Inventories

Inventories are valued at the lower of cost and net realisable value after making due allowance for obsolete and slow-moving items. Cost includes direct materials, direct labour and those overheads that have been incurred in bringing the inventory to its present location and condition.

1.16

Financial Instruments

Financial assets and financial liabilities are recognised on the Consolidated balance sheet when it becomes a party to the contractual provisions of the instrument. 

The financial instruments, excludes current receivables and payables comprise cash or overdraft and unsecured non-convertible loan notes. The directors consider the fair value not to be materially different to the carrying value for the financial instruments. During the years under review, the Company did not enter into derivative transactions and did not undertaken trading in any financial instruments.

1.17

Contingent deferred consideration payments

Contingent deferred consideration payments are not included in the cost of acquisition at the time of initially accounting for the investment where the deferred consideration payment is not probable or cannot be measured reliably If the contingent consideration subsequently becomes probable and can be measured reliably, the additional consideration is treated as an adjustment to the cost of the initial investment.

1.18

Trade and other receivables

Trade receivables are initially recognised at fair value and subsequently at amortised cost using the effective interest method less any provision for impairment. A provision for impairment is made when collection of the full amount is no longer probable. Bad debts are written off when identified. The fair value of the Company's trade and other receivables is equivalent to their book values as set out in the financial information.

1.19

Cash and cash equivalents

Cash and cash equivalents in the balance sheet comprise cash at bank and in hand, demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value.

For the purpose of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents net of outstanding bank overdrafts.

1.20

Financial liabilities and equity

Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and equity instrument. An equity instrument is any contract that evidences a residual interest in the assts of the Group after deducting all of its liabilities.

1.21

Share capital

The Company has one class of ordinary share, which carries no rights to fixed income. All ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets.

Ordinary shares issued by the Company are classified as equity and recorded at fair value on initial recognition received, net of direct issue costs

1.22

Trade and other payables

Trade payables are initially recognised at fair value and subsequently at amortised cost using the effective interest method. The fair value of the Group's trade and other payables is equivalent to their book values as set out in the financial information.

1.23

Income tax expense

The taxation charge represents the sum of current tax and deferred tax.

The tax currently payable is based on the taxable profit for the period using the tax rates that have been enacted or substantially enacted by the balance sheet date. Taxable profit differs from the net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible 

1.24

Deferred taxation

Deferred tax is recognised, using the liability method, in respect of temporary differences between the carrying amount of the Group's assets and liabilities and their tax base. Deferred tax liabilities are offset against deferred tax assets within the same taxable entity or qualifying local tax group. Any remaining deferred tax asset is recognised only when, on the basis of all available evidence, it can be regarded as probable that there will be suitable taxable profits, within the same jurisdiction, in the foreseeable future against which the deductible temporary difference can be utilised. Deferred tax is determined using tax rates that are expected to apply in the periods in which the asset is realised or liability settled, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax is recognised in the income statement, except when the tax relates to items charged or credited directly in equity, in which case the tax is also recognised in equity.

2008

2007

£'000

£'000

Contract revenue recognised in relation to construction contracts in the year and retentions

17,444,169

11,385,016

For contracts in progress at the balance sheet date:

Aggregate costs incurred to date

16,428,968

6,280,282

Recognised profits to date

4,209,105

1,334,172

Advances received

-

341,585

Retentions due

200,310

-

2008

2007

£'000

£'000

Net finance costs

Finance expenses

Other loan interest

(54,002)

(7,094)

Interest on finance leases

(515)

(486)

Interest on late payment of tax

-

(3,976)

Interest paid

(54,517)

(11,556)

Finance income

Bank interest received

40,679

2,294

(13,838)

(9,262)

Administrative expenses

Depreciation of property, plant and equipment:

- owned by the Group

11,414

3,879

- held under finance leases

7,362

8,888

Auditors' remuneration

30,000

4,250

No.

No.

The average number of employees (including executive Directors) was

85

78

The split of employees is as follows:

No.

No.

Administration 

15

2

Cost of sales

57

11

Management

13

65

85

78

Employment costs

2008

2007

£'000

£'000

Cost of Sales

1,718,106

1,303,130

Administration

879,984

788,812

Social Security costs

257,718

218,442

2,855,808

2,310,384

Key management personnel compensation

Short-term employee benefits

270,461

175,376

Post-employment benefits

53,100

53,100

323,561

228,476

Directors remuneration

2008

2007

Salaries and

 fees paid

 or receivable

Pension contributions 

Total

Total

£

£

G Read

203,003

53,100

256,103

228,476

A Collins

50,000

-

50,000

-

R Patel

6,000

-

6,000

-

J Hanley

2,083

-

2,083

-

P Jay

9,375

-

9,375

-

270,461

53,100

323,561

228,476

2008

2007

£'000

£'000

Current tax

Current tax on income for the period

195,721

-

-

Deferred tax 

Deferred tax charge

(8,111)

-

Income tax expense

187,610

-

Income tax is calculated at 28.5% (2007 - 30%) of the estimated assessable profit for the year. On 1 April 2008, the rate of corporation tax applicable to the companies in the Group fell from 30% to 28%. The differences are reconciled below:

Factors affecting the tax charge

2008

2007

£'000

£'000

Profit on ordinary activities before taxation

1,360,477

1,190,895

Loss on ordinary activities before taxation multiplied by standard rate of UK Corporation Tax of 28.5% (2007: 30%)

387,736

357,269

Effects of:

Expenditure not allowable for tax purposes

137,874

29,259

Depreciation for period in excess of capital allowances

(4,140)

-

Movement in tax losses

(302,640)

(385,383) 

Negative goodwill

(39,647)

-

Other adjustments

16,538

(1,145)

Current tax charge

195,721

-

As at 31 December 2008 the Group has tax losses carried forward of approximately £268,000 in respect of non-trading items. No deferred tax asset has been recognised.

The basic earnings per share are calculated by dividing the earnings attributable to equity shareholders by the weighted average number of shares in issue. In calculating the diluted loss per share, share options outstanding have been taken into account where the impact of these is dilutive.

The weighted average number of shares in the period were:

2008

2007

Number

Number

Basic ordinary shares of 0.1p each 

75,611,034

51,220,000

Dilutive ordinary Shares from warrants

736,776

-

Total diluted

76,347,810

51,220,000

In the year ended 31 December 2008, the conditions attached to the deferred consideration shares were not met and as such there is no dilutive effect on the average weighted number of ordinary shares or the diluted earnings per share.

The comparative number of shares for 2007 reflects the shares that would have been in issue had Mountfield Building Group Limited been acquired by Mountfield Group Plc on 1 January 2007 ("MBG Acquisition Shares"). The number of shares for 2008 assumes that the MBG Acquisition Shares were in issue throughout 2008.

2008

2007

Earnings attributable to equity share holders of the parent

Basic earnings per share (p)

1.55

2.33

Diluted earnings per share (p)

1.54

2.33

Goodwill

£'000

Cost

At 1 January 2008 

-

Additions

15,816,529

At 31 December 2008

15,816,529

Acquisitions

On 16 October 2008 the Company acquired the entire issued share capital of Mountfield Building Group Limited, MBG Construction Limited, Connaught Access Flooring Holdings Limited and Mountfield Land Limited. The total consideration for the acquisitions was £18,582,000, split as follows:

Mountfield Building Group Limited and MBG Construction Limited for a combined consideration of £7,622,000 payable by the issue of 51,220,000 Ordinary Shares of 0.1p each at a price of 10p per share and by the issue of £2,500,000 unsecured non-convertible loan notes;

Connaught Access Flooring Limited for a consideration of £9,460,000 payable by the issue of 64,600,000 Ordinary Shares of 0.1p each at a price of 10p per share and by the issue of £3,000,000 unsecured non-convertible loan notes; and

Mountfield Land Limited for an initial consideration of £1,500,000 payable by the issue of 15,000,000 Ordinary Shares of 0.1p each at a price of 10p per share and a deferred consideration of up to £2.25 million, to be settled by the allotment of Ordinary Shares of 0.1p each, based on a multiple of 4 times the average post tax profits of Mountfield Land Limited in the two financial years beginning on 1 January 2009 and after deducting the initial consideration.

The loan notes are interest bearing at 2% above Barclays Bank plc base rate and are redeemable by 30 June 2011.

The acquisition of Mountfield Building Group Limited was accounted for as a reverse acquisition, thus the goodwill acquired is calculated based on the net assets of the legal parent, Mountfield Group Limited, which at the date of acquisition were as follows:

£'000

Trade and other receivables

348,041

Cash and cash equivalents

45,660

Trade and other payables

(984,366)

Income tax payable

(534)

(591,199)

Goodwill

5,914,213

5,323,014

Satisfied by:

Issue of shares

4,797,384

Cash expended on costs of acquisition

525,630

5,323,014

MBG Construction Limited was acquired by Mountfield Building Group Limited on 18 August 2008. The net assets at the date of acquisition were as follows:

MBG Construction Limited

£

Trade and other receivables

786,892

Cash and cash equivalents

167,907

Trade and other payables

(815,603)

Income tax payable

(12,888)

126,308

Negative goodwill

(126,308)

-

Negative goodwill is written-off to the income statement in the period in which it arises.

MBG Construction Limited contributed £50,656 revenue and a profit of £37,372 to the Group's profit before tax for the period between the date of acquisition and 31 December 2008. If the acquisition had occurred on 1 January 2008, Group revenues for the year would have been increased by £93,825 and Group profit attributable to equity holders of the Company would have been increased by £79,842.

The net assets of Connaught Access Flooring Limited and Mountfield Land Limited at the date of acquisition were as follows:

Connaught Access Flooring Limited

Mountfield

Land

Limited

Total

£'000

£'000

£'000

Fixed assets

91,067

-

91,067

Stocks

135,723

-

135,723

Trade and other receivables

1,770,338

485

1,770,823

Cash and cash equivalents

1,440,036

-

1,440,036

Trade and other payables

(1,479,677)

-

(1,479,677)

Income tax payable

(622,457)

-

(622,457)

Deferred Tax provision

(19,644)

-

(19,644)

1,315,386

485

1,315,871

Goodwill

8,374,308

1,528,008

9,902,316

9,689,694

1,528,493

11,218,187

Satisfied by:

Issue of shares

6,460,000

1,500,000

7,960,000

Issue of loan notes

3,000,000

-

3,000,000

Cash expended on costs of acquisition

229,694

28,493

258,187

9,689,694

1,528,493

11,218,187

CAF contributed £1,281,618 revenue and a profit of £149,010 to the Group's profit before tax for the period between the date of acquisition and 31 December 2008. If the acquisition had occurred on 1 January 2008, Group revenues for the year would have been increased by £6,371,598 and Group profit attributable to equity holders of the Company would have been increased by £1,216,632.

Land contributed £nil revenue and a loss of £58,339 to the Group's profit before tax for the period between the date of acquisition and 31 December 2008. If the acquisition had occurred on 1 January 2008, Group revenues for the year would have been increased by £nil and Group profit attributable to equity holders of the Company would have been increased by £nil.

Impairment of goodwill

For the purposes of impairment testing of goodwill the carrying value of the cash-generating units ('CGU') (including goodwill) are compared to the recoverable amount of the CGUs and any deficits are provided. The carrying value of the CGUs includes only these assets that can be attributed directly, or allocated on a reasonable and consistent basis.

The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on three year financial budgets approved by management. Cash flows beyond the three year period are extrapolated using the estimated growth rates stated below.

The key assumptions used in the value-in-use calculations for each CGU are as follows:

Terminal value based on 3% future growth in cash flows

Discount rate of 10%

Revenue was based upon actual amounts measured in prior periods which were projected forward in accordance with expected trends.

On the basis of the results of the above analysis there was no impairment of goodwill during the year.

Freehold and leasehold property

Fixtures and fittings

Plant and equipment

Motor vehicles

Total

£

£

£

£

£

Cost

At 1 January 2008

63,375

-

56,735

38,449

158,559

Transfers upon acquisition

109,478

154,868

62,171

55,394

381,911

Additions

128

2,833

1,035

4,675

8,671

At 31 December 2008

172,981

157,701

119,941

98,518

549,141

Depreciation

At 1 January 2008

8,775

-

24,530

12,867

46,172

Transfers upon acquisition

84,846

119,211

55,895

30,892

290,844

Charge for the period

2,434

3,031

4,266

9,045

18,776

At 31 December 2008

96,055

122,242

84,691

52,804

355,792

Net book value

At 31 December 2008

76,926

35,459

35,250

45,714

193,349

At 31 December 2007

54,600

-

32,205

25,582

112,387

The net book value of plant and equipment and motor vehicles includes an amount of £22,895 (2007: £25,582) in respect of the assets held under finance leases.

The net book value of freehold and leasehold property includes an amount of £22,926 (2007: £nil) in respect of leasehold improvements to a property leased by Connaught Access Flooring Limited.

2008

2007

£'000

£'000

Inventories

135,480

-

2008

2007

£'000

£'000

Trade receivables

1,087,456

533,691

Less: Provision for impairment of trade receivables

(37,212)

-

1,050,244

533,691

Contract retentions

518,264

456,317

Other receivables

440,081

44,649

Prepayments

76,562

37,150

Amounts recoverable on long term contracts

2,242,853

1,458,030

4,328,004

2,529,837

Based on prior experience and an assessment of the current economic environment, management believes there is no further credit risk provision required in excess of the normal provision for impairment of trade receivables.

The average credit period taken on sales is 60 days. No interest is charged on overdue receivables. There is no material difference between the fair value of receivables and their book value.

Amounts recoverable on long-term contracts are stated net of discounts allowed of £44,415 (2007: £nil).

The movement in the provision for impairment of trade receivables is as follows:

£'000

Balance at 1 January 2008

-

Charged to the income statement

37,212

Balance at 31 December 2008

37,212

The Group's trade and other receivables that were past due but not impaired relate to a number of individual customers for whom there is no reason to believe that the debt is not recoverable. The ageing of these trade receivables and contract retentions is as follows:

2008

2007

Trade receivables

£'000

£'000

Three to six months

117,619

-

Six to nine months

31,242

-

Nine to twelve months

3,528

-

More than twelve months

68,908

-

221,297

-

Contract retentions

Three to six months

34,584

-

Six to nine months

4,641

46,974

Nine to twelve months

166

-

More than twelve months

13,114

47,855

52,505

94,829

2008

2007

£'000

£'000

Cash at bank and in hand

2,178,667

3,494

Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates.

The Group had no overdraft facility in place as at 31 December 2008.

The Group currently has a bank overdraft facility of £250,000 with Barclays Bank Plc, which is secured by a fixed charge over the book debts and property of Mountfield Building Group Limited and a floating charge over all other assets of that company and a director's limited guarantee for £500,000.

For the purpose of the cash flow statement, cash and cash equivalents comprise the following at 31 December 2008:

2008

2007

£'000

£'000

Cash at bank and in hand

2,178,667

3,494

Bank overdraft

(170,325)

-

2,008,342

3,494

As at

31 December

As at

31 December

2008

2007

£'000

£'000

Authorised:

1,000,000,000 Ordinary shares of 0.1p each

(2007: 1,000 ordinary shares of £1 each)

1,000,000

1,000

Issued:

169,558,520 Ordinary shares of 0.1p each

(2007: 1,000 ordinary shares of £1 each)