MXCP.L Regulatory News (MXCP)

23 May 2007 07:01

2 ergo Group plc23 May 2007 Embargoed until 7am 23 May 2007 2ergo Group plc ("2ergo" or "the Group") Interim Results for the six months ending 28 February 2007 2ergo Group plc is a leading provider of interactive and multi-channelcommunications across mobile and fixed-line telecommunications and the Internet.Clients range from SMEs to multi-national enterprises and public sectororganisations. 2ergo's services and solutions enable organisations to exploit the benefits oftechnology, to switch on new revenue streams, optimise business processes andopen up new marketing channels. The Group is pleased to announce interim resultsfor the six months ended 28 February 2007. Six months to Six months to February 2007 February 2006 % change (Restated) -------------------------------------------------------------------------------- £'000 £'000 Turnover 15,711 14,719 +7%Gross Profit 4,059 2,546 +59%Operating profit 1,108 916 +21%Pre-tax profit 1,197 952 +26%Adjusted pre-tax profit (1) 1,571 1,108 +42%Adjusted pre-tax profit before FRS20 charge, Proteus and Broca losses (1) 2,067 1,185 +74% Basic earnings per share 3.73p 2.67p +40%Adjusted earnings per share (1) 5.10p 3.24p +57% (1) figures stated pre amortisation * Turnover up 7% to £15.7 million (2006: £14.7 million) * Increase in gross profit of 59% to £4 million (2006: £2.5 million), with gross margins increasing from 17% to 26% * Adjusted pre-tax profit up 42% to £1.6 million (2006: £1.1 million) * Underlying, like-for-like profits from continuing activities, excluding FRS20 charge, the costs associated with Broca prior to demerger and the acquisition of Proteus, up 74% to £2.1 million (2006: £1.2 million) * Acquisition of Proteus Inc with offices in Washington, D.C. and Buenos Aires * Successful demerger of Broca Barry Sharples, Joint Chief Executive of 2ergo, commented: "We are pleased to announce another strong period of growth, which is demonstrated by solid financial results, the launch of further new services for clients, and superb headway in product innovation and development. "As sectors of industry awaken to the 'Mobile Potential' we are seeingincreasing opportunities to help organisations move closer to their customers.This has led to the development of new and innovative propositions that weexpect to contribute to the results over the coming years, such as mobileadvertising, viral marketing, user-generated mobile video and social communityportals. "As such, we believe the mobile industry will continue to be one of the fastestdeveloping industries in the world and the Board is confident that the Group iswell placed to capitalise on the opportunities that these changes will bring." For further information, please contact: 2ergo Group plc +44 (0)1706 221 777Neale Graham, Joint CEOBarry Sharples, Joint CEOJill Collighan, Finance Director Tavistock Communications +44 (0)20 7920 3150Matt Ridsdale / Andrew Dunn Numis Securities LimitedDavid Poutney / Stuart Skinner +44 (0)20 7260 1000 2ergo Group plc ("2ergo" or "the Group") Interim Results for the six months ending 28 February 2007 The first half of this year has been a period of significant investment andbusiness change for 2ergo, resulting in a successful US acquisition and thedemerger of Broca (formerly branded 2safeguard) from the 2ergo Group togetherwith a range of new product and technology developments. As more sectors of industry seek to exploit the potential of the mobile channel,this is translating into an increasing number of opportunities for the Group.This has led to the development of many new and innovative propositions that theBoard expect to contribute to the results over the coming years, such as mobileadvertising, viral marketing, user-generated mobile video and social communityportals. The Board is particularly excited by the growing international demand for2ergo's 'total solutions services', and the launch of more, although as yetunproven, services for major media brands that include Disney, Fox andNBC-Universal in both the US and Latin American markets. Financial Review The first half of 2007 has seen turnover for the Group rise to almost £16million, with an increase in gross margin as predicted, up to 26% compared to17% for the six months to February 2006. This is in line with the Group'spreviously stated strategy of providing 'total solution services' and has led toan increase in gross profit of £1.5 million, a rise of 59%. Also contributingto this increase in gross margin are the results from Proteus Inc, the USsubsidiary acquired by the Group in September 2006. In its position as a USmarket leader for mobile solutions, Proteus currently generates healthy grossmargins and is well on the way to becoming an integral part of the Group. Group operating profit for the period was £1.1 million. This has been achievedafter accounting for the following: * a charge of £181k (2006: £77k) in respect of the new FRS20 share option charge; * a loss of £116k (2006: nil) due to non-capital sales and administrative costs in relation to Broca, prior to its demerger from the 2ergo Group; and * losses amounting to £199k incurred in Proteus Inc since its acquisition. Excluding the above, the 2ergo business performed well with a 60% rise inunderlying operating profit to £1.6 million, compared with £1.0 million in thefirst half of 2006. Profit before tax was £1.2 million, compared to £1.0 million in 2006. Adjusted(pre-amortisation) profit for the period was £1.6 million (2006: £1.1 million). When stated before the three items listed above, the underlying adjusted profitwas £2.1 million (2006: £1.2 million) a rise of 74%. In anticipation of the demerger of Broca from the 2ergo Group shortly after theperiod end, a significant number of share options in 2ergo were exercised bystaff in order to participate in the one-for-one share structure of thedemerger, and become shareholders in Broca. One result of the exercise of theseoptions is that the Group will be able to obtain a Corporation Tax deduction inthe year to 31 August 2007 for the difference between the exercise price (setpre-flotation of 2ergo) and the market value on the date of exercise. As aresult, the Group's Corporation Tax charge for the full year will besignificantly below that expected, at an anticipated rate of under 15%. The balance sheet at 28 February 2007 is stated before the demerger of Brocafrom the Group, which was effective from 6 March 2007, and displays at a strongnet asset position of £12.6 million. Cash at bank was £9.6 million, an increaseof £4.7 million during the period. £1.2 million of this increase came fromoperating activities, a further £5.0 million was generated by the exercise ofshare options and the sale of shares from treasury, while there was capitalexpenditure of £1.5 million, including the development of the 2safeguardIntellectual Property (IP). The results for the period have been achieved despite the significant amount ofmanagement time invested in the demerger of Broca from the 2ergo Group and itssubsequent flotation on AIM which took place immediately after the period end. As part of the demerger 2ergo has sold the 2safeguard IP to the Broca group.This sale, together with a cash subscription for Broca plc's shares (AIM:BROC)has generated an investment for 2ergo of 19.9% of the Broca share capital. Thisinvestment will be reflected in the Group's full year accounts. Operational Review The Group has worked on a number of new initiatives during the period. One majorproject has been 2ergo's success in becoming the first company to deploy the newmobile payment scheme, Payforit, across all UK networks. Developed through a strategic UK cross-mobile operator initiative, Payforit hasbeen introduced as a protective measure for consumers in light of the negativepublicity relating to mobile phone billing. This was further heightened byrecent press coverage surrounding high profile television services, which havehad a wider impact on consumer confidence, affecting the industry as a whole.The full impact on the industry will be judged over the coming months. This longawaited billing solution aims to repair and overcome these concerns bystandardising the way costs and the method of charging are presented to theconsumer at the point of sale. The Group has successfully achieved the status of 'Accredited PaymentIntermediary' across all mobile networks during the period for the Payforitscheme. This 'trusted party' status and new service capability means that 2ergois well placed to leverage significant advantages over potential competitors.The Group is now able to allow its clients to offer consumers a safe,transparent and convenient environment for M-payments regardless of which mobileoperator they use. The Group continues to be at the forefront of innovation with the development of the next generation of the Multiserve Platform. This will enable many of 2ergo's new and traditional mobile services to be offered as 'self service' solutions. These enhancements will further automate many of 2ergo's customer support and account management procedures, and in doing so, empower clients with the ability to administer many of their own services. This will help clients to reduce timeframes required to launch and deliver new services. Additionally, with integrated budget and goal planning, execution and monitoring capabilities the Multiserve Platform will provide clients with a comprehensive toolset to report and analyse return on their investments. Last year's successful acquisition of video editing technology from VICS, theUMIST spin-out, culminated in the release of an exciting new product range for2ergo. Branded MultimediaSuite, this modular product enables content owners andproducers to simplify the entire digital content management process. Thisincludes the provisioning of web and mobile storefronts and the production,protection and sale of content. During the period, this suite of products hasprovided a solid foundation for many new product innovations, including thelaunch of mobile advertising propositions, viral marketing, user-generatedmobile video and social community portals. The Group continues to adopt a strategy that allows it to leverage its superiortechnology, by focusing on the provision of complex, bespoke solutions forenterprise clients. Many of these solutions are unique, making use of specialisttechnologies that include natural language processing and voice recognition, andmore recently, Broca's secure messaging protocol, all of which attract highermargins. US Review The US acquisition of Proteus, completed at the beginning of the period, is nowfully integrated into the Group's operations. Proteus brought with it anestablished client base of major media brands, such as Disney, Fox, andNBC-Universal, providing 2ergo with a solid route into both the North and SouthAmerican markets. 2ergo's technology is helping to differentiate Proteus andseveral clients have already signed up for new solutions. The Board believesthis provides evidence that US organisations are recognising the attractivenessof the Group's offerings and the advantages for enterprises in utilising themobile channel. The Board will continue to conservatively invest to build its USbusiness and is confident this region will generate significant growth. The period was marked by several main developments in terms of mobile servicesin the US market, including a sharp rise in the deployment of mobile internetsites for major media companies, along with a rise to prominence of interactivemessaging campaigns. As mobile handsets and networks in the US continue to improve and evolve, USmedia companies have begun to show an interest in mobile advertising. With apush into 'mobile advertising' and 'mobile search' by major online advertiserssuch as Yahoo and Google, this has driven mobile advertising into mainstream USprominence. As such mobile internet site developments have become an increasingfocus for many US brands. During the period Proteus has continued to consolidate its position in the USmarket, introducing many new services for new and existing clients. Extendingits five year partnership with News Corp, Proteus developed a range ofinnovative mobile solutions for a number of FOX brands. These included thelaunch of a ground-breaking mobile portal for over 20 of FOX's local affiliatesacross the US. This mobile internet environment enables consumers to access allthe information available online and on-air from their local FOX affiliate viatheir mobile phone. Proteus also deployed an industry-leading mobile internet site for FOX News,bringing the US's number one news program to the mobile user. The FOX Newsmobile internet site is a leading example of the use of mobile advertising inthe US market. During the period Proteus also worked closely with The Walt Disney Company todeploy new services for both film and television productions. These included thelaunch of mobile content storefronts, selling ringtones, wallpapers and othercontent for over half a dozen Disney Studios releases including Apocalypto, StepUp and Wild Hogs. For ABC News, Proteus deployed a series of live SMS votingevents to allow audience interaction during primetime televised programmes. Inaddition, Proteus extended its working relationship with DiscoveryCommunications Inc. to develop a range of mobile initiatives including mobilealerts, sweepstakes, trivia and polling applications. Furthermore, Proteus has entered into a partnership with THQ Wireless, a leadingvideo and mobile game developer for popular sports brands, such as NFL and NBA,as well as top TV and entertainment franchises, including SpongeBob SquarePants,South Park and WWE, and major movie blockbusters such as Star Wars. As part ofthe agreement, Proteus is developing a mobile web-based storefront for contentsales ranging from games to ringtones, wallpapers and video clips. To help THQWireless extend its reach beyond US network portals, Proteus will also bedeploying a cutting edge mobile portal and a range of mobile marketinginitiatives in support of this project. Latin America Review Proteus's increasing local presence in Latin America, with offices in BuenosAires and Mexico City, is helping to further differentiate the company from itsUS competitors. During the period the Group has increased the number of directconnections it has with mobile networks in the region, a market that is growingand currently stands at over 241 million subscribers (Source: Totel Pty 2006).These include major Brazilian network operators Claro Brasil and Oi, Telcel inMexico and full coverage for the Argentinean mobile market. NBC Universal chose Proteus to launch its brands into the Latin American market- such as brands for blockbuster movies like Jaws and E.T., television showsHouse and Law & Order, and pop culture icons such as Woody Woodpecker. Followinga successful project, NBC Universal is now available throughout the Mexicanmobile market and is quickly expanding across the region, with upcoming launchesplanned for Argentina and Colombia. Proteus continues to advance its relationship with FOX Latin American Channels(FLAC), bringing such hit shows as 24 to increasing numbers of mobile consumersacross the region. Proteus and FLAC also teamed up to deliver mobile alerts andpolling for FOX's coverage of Latin American sports events. Broca As part of 2ergo's strategy to focus on its core activities, during the periodBroca (formerly branded 2safeguard) was demerged from the 2ergo Group. This hasallowed the Broca directors the independence to develop the Broca business andto seek and develop opportunities that exist outside of 2ergo. The demerger, which was structured so that shareholders in 2ergo received sharesin Broca plc on a one-for-one basis, was a complex, lengthy process, whichrequired a considerable investment of time from the 2ergo senior management. Itwas effected via an internal corporate reorganisation, which saw the creation oftwo new entities, Broca Communications Limited and Broca plc. The 2safeguard IP,which was in the latter stages of development by 2ergo, was sold to BrocaCommunications Limited in February 2007. Settlement of the related debt was madeby the Broca Group through the issue of shares in Broca plc to 2ergo followingflotation of Broca on AIM in March 2007. In addition, a further cash investmentwas made by 2ergo for shares in Broca, also in March 2007. As a result of these transactions, 2ergo now holds 19.9% of the share capital ofBroca plc. The demerger also resulted in the implementation of trading and serviceagreements between 2ergo and Broca plc. Through the trading agreement 2ergo nowacts as a reseller for the Broca technologies, creating new revenue streams forthe Group. Broca's flagship service, SAMS (Secure Advanced Message Service), is a uniqueand patented technology that encrypts traditional SMS messages, allowingsensitive data and content, such as card payment details, to be sent securelyvia the mobile network. During the period a number of product enhancements have been initiated to embedthe SAMS technology into 2ergo's business solutions portfolio. 2ergo'sincreasing focus on exploiting the potential of Broca's enabling technology hascontributed to an increase in the number of pre-sales discussions withprospective UK clients. The Board is encouraged by the number and scale of opportunities being generatedthrough the partnership with Broca plc and looks forward to exploiting thesynergies and complementary revenues that the SAMS technology brings to 2ergo'sbusiness solutions portfolio. US & Latin America Outlook Since the acquisition in September 2006 of Proteus, which was incurringsignificant losses, 2ergo has reshaped the business and provided direction andexpertise to create a quick turnaround. The Board believes that Proteus is nowready to enhance its position in the North and South American markets and plansto make further investment in the region. Proteus will seek to further build its position over the coming period and theBoard predicts the medium term will be defined by strong growth across itsbusiness lines. Proteus will continue to develop new products and services forexisting clients, as well as penetrate new clients and industry verticals. With the combined number of mobile subscribers now totalling 461 million(source: The Mobile World 2006, Totel Pty 2006) across the US and Latin America,the Board believes the mobile channel presents media companies and majorconsumer brands with new opportunities to reach their customers in a highlytargeted manner. Attention on the media landscape will be strengthened by additional sales andmarketing resources to capitalise on what is a burgeoning section of the mobilemarket. Proteus will also seek to introduce new services to non-mediaorganisations, extending its relationship with clients in the financial servicessector and potentially expanding into other business-to-business activities. Focus over the coming months will be to further productise Proteus' offerings toenable higher margin sales and quicker time to market for its clients. Thisinitiative is well underway with the soon to be announced launch of SWIFT,Proteus proprietary mobile internet product suite. The Group's Latin American business will continue to be a focal point for thecompany. Proteus expects to establish a local presence in several other LatinAmerican countries, beginning with Brazil, and continue to expand its mobilenetwork coverage across the region. General Outlook The first half of this year has been a period of significant investment andbusiness change for 2ergo. The Broca demerger and the Proteus acquisition are significant achievementswhich have brought pressures to the Group over and above those exerted by thenormal operation of the core business. One challenge for the Board was tominimise the impact of these pressures on delivering the Group's results. Whilstit believes trade has been largely unaffected, as demonstrated by these results,growth for the third quarter of the current financial year has slowed slightlywhich the Board believes could be attributed to these additional pressures. However, the Board is confident that these achievements are in the bestinterests of the Group, and in the medium to long term will further strengthen2ergo's position to exploit the expanding and evolving global market forconvergent mobile communications. Going forward, the Directors believe that the Group will enjoy strong benefitsfrom the trading arrangements it has with Broca. These arrangements should leadto new revenue streams within the Group, and new opportunities to generatehigher margin profits both in Europe and in the US, in line with the Group'sproven strategy of providing 'total solution services'. In addition, 2ergo willbenefit from its shareholding within Broca. This 19.9% investment was, at closeof trading on 22 May 2007, valued at £ 6.5 million. Another major change to the Group was the acquisition at the start of the periodof Proteus Inc, to capitalise on the rapid growth expected within the US mobilemarket. Proteus had been incurring significant losses for the past few years,and the challenge for 2ergo was to successfully integrate Proteus into the Groupfrom a technical and operational perspective, whilst also stemming losses. TheBoard is pleased with the progress made in this area, the losses incurred in thefirst half of this financial year being significantly lower than those prior tothe acquisition and with continued investment expects Proteus to significantlycontribute to the Group's medium term profits. Whilst all industry statistics point to an expected significant growth of the USmarket, it still lacks traction. This is due, in no small part, to the barrierscreated by the US mobile networks, mirroring the position of the UK mobilemarket several years ago. Signs are now showing that these barriers are startingto alleviate, giving confidence to the Board that this market is poised forsignificant growth. The Board looks forward to a period of consolidation following these significantchanges. The Group's new business pipeline remains healthy in Europe, the US andLatin America, and 2ergo continues to enjoy the benefits of strong customerloyalty. The Board has an ongoing acquisition strategy and will continue to driveinnovation in line with an aggressive research and development plan. Coupledwith this, the Board believes that the mobile market in particular is enteringits next development phase and expects some of the richer services now availableto begin to gain momentum. Once they do, the Board predicts the market will groweven more rapidly. -Ends- 2ergo Group plc Consolidated Profit and Loss AccountFor the six months ended 28 February 2007 Notes Restated Restated Unaudited Unaudited Audited 6 months to 6 months to Year to 28 February 28 February 31 August 2007 2006 2006 £'000 £'000 £'000--------------------------------------------------------------------------------Turnover Continuing operations 15,179 14,719 29,515Acquisitions 2 532 - --------------------------------------------------------------------------------- 15,711 14,719 29,515Cost of sales (11,652) (12,173) (23,588)-------------------------------------------------------------------------------- Gross profit 4,059 2,546 5,927Operating expenses (2,951) (1,630) (3,699)-------------------------------------------------------------------------------- Operating profit before FRS 20 share option charge 1,289 993 2,400 FRS 20 share option charge 3 (181) (77) (172)--------------------------------------------------------------------------------Operating profit Continuing operations 1,307 916 2,228Acquisitions 2 (199) - --------------------------------------------------------------------------------- 1,108 916 2,228Finance charges (net) 89 36 92--------------------------------------------------------------------------------Profit on ordinary activities before taxation 1,197 952 2,320Tax on profit on ordinary activities 4 (180) (233) (483)--------------------------------------------------------------------------------Retained profit for the 1,017 719 1,837period -------------------------------------------------------------------------------- Earnings per ordinary share:Basic 5 3.73 p 2.67 p 6.81 pDiluted 5 3.64 p 2.59 p 6.62 p 2ergo Group plc Consolidated Statement of Total Recognised Gains and LossesFor the six months ended 28 February 2007 Notes Restated Restated Unaudited Unaudited Audited 6 months to 6 months to Year to 28 February 28 February 31 August 2007 2006 2006 £'000 £'000 £'000--------------------------------------------------------------------------------Profit for the financial period 1,017 719 1,837Prior period adjustment - FRS 20 share option charge 3 (279) - -Prior period adjustment - Deferred tax effect of FRS 20 share option charge 3 84 - ---------------------------------------------------------------------------------Total recognised gains and losses for the period 822 719 1,837-------------------------------------------------------------------------------- 2ergo Group plc Consolidated Balance SheetAs at 28 February 2007 Restated Restated Unaudited Unaudited Audited 28 February 28 February 31 August 2007 2006 2006 £'000 £'000 £'000-----------------------------------------------------------------------------Fixed assets Intangible assets 4,492 1,335 3,413Tangible assets 239 223 234----------------------------------------------------------------------------- 4,731 1,558 3,647-----------------------------------------------------------------------------Current assets Stock 51 52 51Debtors 5,349 6,353 4,923Cash at bank and in hand 9,598 3,254 4,857----------------------------------------------------------------------------- 14,998 9,659 9,831 Creditors: amounts falling due within one year (7,052) (5,991) (6,986)-----------------------------------------------------------------------------Net current assets 7,946 3,668 2,845-----------------------------------------------------------------------------Total assets less current liabilities 12,677 5,226 6,492Provisions for liabilities andcharges (32) - (91)-----------------------------------------------------------------------------Net assets 12,645 5,226 6,401-----------------------------------------------------------------------------Capital and reserves Called up share capital 301 299 299Share premium account 7,141 3,800 4,147Merger reserve 1,512 1,512 1,512Other reserve (413) (657) (536)Profit and loss account 3,656 88 700Share option reserve 448 184 279-----------------------------------------------------------------------------Shareholders' funds 12,645 5,226 6,401----------------------------------------------------------------------------- 2ergo Group plc Consolidated Cash Flow StatementFor the six months ended 28 February 2007 Unaudited Unaudited Audited 6 months to 6 months to Year to 28 February 28 February 31 August 2007 2006 2006 £'000 £'000 £'000-----------------------------------------------------------------------------Net cash inflow from operating activities 1,253 1,628 4,152Returns on investments and servicing of finance Interest received 89 36 92-----------------------------------------------------------------------------Taxation (140) - (639)-----------------------------------------------------------------------------Capital expenditure and financial investment Payments to acquire tangible fixed assets (54) (40) (89)Payments to acquire intangible fixed assets (1,342) (247) (1,407)Purchase of subsidiary undertaking (111) - ------------------------------------------------------------------------------ (1,507) (287) (1,496)-----------------------------------------------------------------------------Net cash (outflow)/inflow before financing (305) 1,377 2,109-----------------------------------------------------------------------------Financing Net proceeds from share issue/ issue of options 348 1,429 1,429Purchase of own shares held in treasury - (704) (710)Net proceeds from sale of shares/ exercise of options from treasury 4,575 - 756Proceeds from exercise of options over shares held in EBT 123 - 121Capital element of finance lease payments - (18) (18)----------------------------------------------------------------------------- 5,046 707 1,578----------------------------------------------------------------------------- -----------------------------------------------------------------------------Increase in cash 4,741 2,084 3,687 ----------------------------------------------------------------------------- 2ergo Group plc Notes to the Interim Statement 1. Basis of Preparation The interim financial statements have been prepared on the basis of theaccounting policies set out in the financial statements of 2ergo Group plc forthe year ended 31 August 2006, except for the impact of the introduction of FRS20, the details of which are set out in note 4 below. The financial information contained in these statements does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985. Theaccounts for the year ended 31 August 2006 received an unqualified audit reportand have been filed with the Registrar of Companies. 2. Acquisitions Acquisitions relate to the purchase of Proteus Inc by the Group during theperiod. 3. FRS 20 - Share Based Payments The Group has adopted FRS 20 Share Based Payments in the current period. FRS 20 requires the recognition of a charge for share based payment transactions whichinclude share options. The adoption of FRS 20 also requires a prior period adjustment to be made. This has created a share option reserve at 28 February 2007 of £448,000 (after the impact of the exercise of share options during the period) and reduced the profit and loss account reserve by £448,000. Of this amount £181,000 related to the six months ended 28 February 2007 and £172,000related to the year ended 31 August 2006 of which £77,000 related to the six months ended 28 February 2006. In accordance with applicable accounting standards a deferred tax asset has been recognised at each of the balance sheet dates as a result of the adoption of FRS 20 representing an estimate of the future tax relief available when the share options are exercised. This has increased the profit and loss account reserve by £138,000. Of this amount £54,000 related to the six months ended 28 February 2007 and £51,000 related to the year ended 31 August 2006 of which £23,000 related to the six months ended 28 February 2006. 4. Taxation The tax charge accrued in these interim financial statements reflects anestimated tax rate of 15% for the period to 28 February 2007, which is theanticipated effective composite rate for the current financial year. 5. Earnings per share Basic earnings per share have been calculated by dividing the profit aftertaxation in the period by 27,276,394 shares (2006:26,965,089 shares), being theweighted average number of shares in issue. The diluted earnings per share havebeen calculated on a weighted average number of shares of 27,941,091 (2006:27,741,047). 6. Reconciliation of operating profit to net cash inflow from operatingactivities Restated Restated Unaudited Unaudited Audited 6 months to 6 months to Year to 28 February 28 February 31 August 2007 2006 2006 £'000 £'000 £'000 Operating profit 1,108 916 2,228Depreciation charge 49 32 69Amortisation charge 374 156 422FRS 20 share option charge 181 77 172Decrease in stock - 2 3Increase in debtors (426) (559) (71)Decrease in creditors (33) 1,004 1,329------------------------------------------------------------------------------Net cash inflow from operating activities 1,253 1,628 4,152------------------------------------------------------------------------------ 7. Analysis and reconciliation of net funds 1 September Cash 28 February 2006 Flow 2007 £'000 £'000 £'000 Cash at bank and in hand 4,857 4,741 9,598-------------------------------------------------------------------------------- This information is provided by RNS The company news service from the London Stock Exchange