NBI.L Regulatory News (NBI)

26 Mar 2007 07:02

Northbridge Industrial Services PLC26 March 2007 FOR IMMEDIATE RELEASE 26 MARCH 2007 Northbridge Industrial Services Plc. ("Northbridge" or "The Company") Preliminary Results for the Year Ended 31 December 2006 Northbridge Industrial Services Plc. the industrial services and rental company,today announces its maiden set of preliminary results for the year ended 31December 2006. Highlights: • Includes the results of Crestchic for 9 months post-acquisition • Turnover £6.9 million, pre-tax profits £1.09 million • Crestchic trading ahead of expectations, turnover up 40% in the full 12 months of 2006 • Accelerated investment in the hire fleet of £725,000 in 2006 (2005 £290,000) • Investment to increase capacity at the Burton-on-Trent factory now complete • Strong cash flow with year end net cash balances of £1.1 million • Basic earnings per share 12.8 pence (12.0 pence fully diluted) • Proposed first dividend of 2.0 pence • Also announced today in a separate announcement the acquisition of Loadbank Hire Services for £900,000 Outlook: We are continuing to trade in buoyant markets worldwide and the board expectsthis to continue for the rest of the current year. "The sales order book for 2007 continues to strengthen and hire orders andenquiries have given us confidence to invest further in our hire fleet in thefirst quarter of 2007. Our acquisition of Loadbank Hire Services since the yearend is anticipated to make an immediate impact on our earnings this year." About Northbridge: Northbridge Industrial Services was incorporated for the purpose of acquiringcompanies that hire and sell specialist industrial equipment supplying anon-cyclical customer base including utility companies, the public sector andthe oil and gas industries. In particular it will seek to acquire specialistbusinesses that have the potential for expansion into complete outsourcingproviders. For further information Northbridge Industrial Services Plc. Eric Hook, Chief Executive 07702 831110 Buchanan Communications Charles Ryland 0207 466 5000 These preliminary results for the year ended 31 December 2006 do not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985. They areextracted from the full statutory accounts, which were approved by a committeeof the Board of Directors on 22 March 2007. A copy of those full statutory accounts will be lodged with the Registrar ofCompanies in due course. The report of the auditors on those accounts isunqualified and does not contain a statement under Section 237 (2) or Section237 (3) of the Companies Act 1985 concerning accounting records or failure toobtain necessary information and explanations. CHAIRMAN'S AND CHIEF EXECUTIVE'S REVIEW We are delighted to present our review of the first nine months of trading forNorthbridge following admission of the Company to AIM in March 2006. Trading in Crestchic Limited, our main subsidiary, acquired at the time offlotation, has exceeded expectations with sales up by 40% compared with 2005.This excellent performance was spread across the whole of the company'sactivities. Crestchic designs, manufactures, sells and hires load bank equipment which isprimarily used for the commissioning and maintenance of independent powersources such as diesel generators and gas turbines. The period has seen a strong demand for Crestchic's range of services due to; •the need to continually test and maintain standby and independent power systems; •the increasing reliance on power critical technology used within the banking, medical, marine and defence industries; and •a background of an increasingly unreliable power infrastructure throughout the world. Financial performance Northbridge's consolidated revenue for the period to 31 December 2006 was £6.93million, gross profit and net profit before tax were £3.26 million and £1.09million respectively, and operating cash flow for the nine months was £0.93million. Net Assets at 31 December 2006 were £7.2 million and the group had a net cashbalance of £1.1 million at the year end. Fixed asset investment in Northbridge (including the hire fleet) during theperiod since acquisition was £649,000 and the investment for the full year inCrestchic was £725,000 (2005: £290,000). The underlying performance in Crestchic Limited for the whole year showed animprovement in sales of 40% to £8.7 million (2005: £6.2 million) and net profitbefore tax was up by 49% to £1.88 million (2005: £1.26 million). Based on this performance, the board is pleased to propose the payment of amaiden dividend for 2006 of 2.0 pence per share, which will be paid on 29 May2007 to shareholders on the register on 27 April 2007, subject to shareholderapproval at the Annual General Meeting. Business Review During the period the company experienced strong sales demand from two of itskey overseas markets, the United States and South East Asia. Rental demand wasalso strong and the year ended on a high note with the successful completion ofour major project on Sakhalin Island. This was one of the largest contracts thatthe company has undertaken and was completed in partnership with our Singaporeagent. Demand for our services has been strengthened by the continuing development ofthe oil and gas industry around the world. The success of the Sakhalin Island contract has encouraged us to invest furtherin our load bank and transformer hire fleet; this in the longer term will reducethe necessity of cross hiring equipment and thereby improve overall margins. Since the end of the year, the equipment used on Sakhalin has been moved on totwo concurrent contracts in the Caspian region and a further oil and gas projectin partnership with our agent in Brazil. Work has now been completed on an extension to our freehold factory premises inBurton-on-Trent. This has expanded the production and testing area substantiallyand increased our production capacity which will enable our growth to continue. Strategy Northbridge's strategy as set out in the placing document last year is toacquire and consolidate specialist industrial equipment businesses. The criteriathat these potential targets will possess are; •Potential for expansion into complete outsourcing providers; •Supplying, or capable of supplying a non-cyclical customer base including utility companies, the public sector and the oil and gas sector; •Incorporating a strong element of service work; and •Turnover between approximately £1 million to £10 million. By consolidating a number of such companies Northbridge can add significantvalue through; •organic expansion into new geographical or industry markets; and •complementary acquisitions increasing the Company's product offering to its customer base. In delivering such a strategy we will be able to capitalise on the marketopportunity to become a significant industrial services business serving aninternational market. The first step in this strategy has been achieved by the acquisition of thetrade and assets of Loadbank Hire Services ("LHS") division of TGC InternationalLimited on 23 March 2007, at a total cost of £900,000, net of expenses. LHSoperates from a depot in the south east of London and offers similar services tothose of Crestchic. Turnover for the year ended 31 March 2006 was approximately£635,000. The acquisition provides additional scale, increases the assetsavailable for hire in the Crestchic business, and strengthens our position inthe London area. Staff We would like to take the opportunity to thank all the employees of the groupfor their contribution in delivering this excellent set of results and inparticular in the smooth transition to our status as a public listed company. We would also like to welcome Ash Mehta to the board as Finance Director(designate). Ash will take over the part time role from Brian Connolly on the 1April 2007 following Brian's retirement. Brian joined us at the time ofNorthbridge's inception with the task of helping us through the flotationprocess and our first year as a public company. His hard work and enthusiasmhave been contributory to our success and we wish him well in his retirement. Outlook The order book for 2007 continues to strengthen and hire orders and enquirieshave given us confidence to invest further in our hire fleet during the firstquarter of 2007. Our small acquisition of Loadbank Hire Services since the yearend is anticipated to make an immediate impact on our earnings this year. We are continuing to trade in buoyant markets worldwide where the increasedinvestment in energy infrastructures has created an ongoing demand for ourproducts and services. The board expects this to continue for the rest of thecurrent year. P R Harris E W HookChairman Chief Executive FINANCE DIRECTOR'S REPORT Summary On 28 March 2006 the Company acquired Crestchic Limited, simultaneously raisingequity and loan capital and listing on AIM. From the acquisition date to 31December 2006 the Company delivered a strong financial performance, as reflectedin its cash flow and balance sheet. International Financial Reporting Standards (IFRS) All companies listed on AIM will have to prepare consolidated accounts underIFRS for accounting periods commencing on or after 1 January 2007. As these areour maiden accounts as a listed company, the board has elected to adopt IFRS forthe year to December 2006 as the basis for its financial reporting, to avoid theneed for later transition to IFRS, and to comply with perceived best practice. The main impact of the early adoption for Northbridge is the independentvaluation of the purchased goodwill created by the acquisition of CrestchicLimited (carried out by Globalview Advisors Ltd). Goodwill has been allocated tothe various categories of assets in accordance with IFRS 3. The intangibleassets other than residual goodwill are being amortised over their remaininguseful life (note 11). The board has reviewed the residual goodwill for impairment as at 31 December2006 and in light of Crestchic's performance has decided that no write down isrequired. The board has elected to continue to prepare the accounts of the subsidiarycompany and the parent company under UK GAAP, to enable eventual use of thedistributable reserves of those companies prior to conversion to IFRS. Interest rate risk The Group is cash positive and places its balances on short term deposit withBank of Scotland. The board manages its interest rate policy centrally, fixinginterest rates in relation to LIBOR on all group borrowings and Bank of Scotlandbase rates in relation to overdrafts. Foreign currency exchange risk. Part of the cash at bank is held in Euro and US dollar accounts. There are alsotrade balances and investments in these currencies. The board manages this riskby converting all non functional currency into sterling at the firstopportunity, after allowing for similar functional currency outlays. The group'sforeign exchange risk is not considered to significant and any resulting gainsor losses are recognised in the profit and loss account. Credit risk The group manages its credit risk by assessing all new customers entering intocontracts with them, setting credit ratings which are factored into creditdecisions. The Subsidiary's record of debt collection is very positive and hasonly £13,000 outstanding over 3 months old at 31 December 2006 all of which isfully provided for in accordance with our accounting policies. Financial results Turnover for the nine month period was £6.9 million for Northbridge. On a fullyear basis Crestchic Limited, the only trading subsidiary, reported sales of£8.7 million which represented an increase of 40 % on 2005 (£6.2 million). Northbridge gross profits for the period of £3.2 million were achieved with amargin of 47%. On a full year basis Crestchic gross profits were £4.1 millionversus £3.4 million (2005), an increase of 21%. Gross margin percentage reducedfrom 2005 (54%) largely due to the increased cross hire of equipment from ouragents for our major projects in the year. The incidence of cross hire isplanned to reduce in the future as we continue to increase the investment in ourown hire fleet. Northbridge pre tax profits were £1.1 million for the period and post taxprofits £0.7m. The tax charge at 32.8% was slightly higher than the prevailingtax rate due to the amortisation of intangibles charged for the first time underIFRS and the disallowed costs associated with raising the bank loan. Had Northbridge reported under UK GAAP, the net profit before tax and the posttax profit would have been £1.2 million and £0.8 million respectively. Earnings per share The earnings per share figure of 12.8 pence (12.0 pence diluted) has beencalculated by dividing the profit after taxation by the weighted number ofshares in issue (note 10). The equivalent figures under UK GAAP would have been14.1 pence (13.2 pence diluted) before the amortisation of intangibles. Proposed dividend The Board has proposed, subject to shareholder approval a final dividend of 2.0pence per Ordinary share enabling a dividend cover of 4.95 times. Balance Sheet The consolidated balance sheet reflects the acquisition of Crestchic Limited on28 March 2006 for £6.0 million including costs and net of cash acquired. As at31 December 2006 Net Assets were £7.2 million. Non Current Assets of £6.4million included Goodwill and Intangible Assets of £2.6 million (note 11). FixedAssets of £3.8 million reflects the ongoing investment in the hire fleet duringthe year of £649,000. Cash and cash equivalents of £1.1 million were held at thebalance sheet date. The reconciliation from UK GAAP to IFRS at 31 December 2005 for the BalanceSheet and the Income Statement is not necessary, as there would be no materialdifference. Cash Flow The operational Cash Flow of Northbridge is derived from its subsidiaryCrestchic Limited, net of group costs. For the 9 month period net cash fromoperating activities was £892,000 and subsequent to the acquisition of CrestchicLimited, there was further investment in Fixed Assets of £649,000. B E Connolly Financial Director CONSOLIDATED INCOME STATEMENT For the year ended 31 December 2006 2006 2005 £'000 £'000 REVENUE 6,933 - Cost of sales (3,673) - GROSS PROFIT 3,260 - Selling and distribution costs (1,202) -Administrative expenses (941) (11) PROFIT/(LOSS) FROM OPERATIONS 1,117 (11) Finance income 14 1Finance costs (43) - PROFIT/(LOSS) BEFORE INCOME TAX 1,088 (10) INCOME TAX EXPENSE (357) - PROFIT/(LOSS) FOR THE YEAR ATTRIBUTABLE TO THEEQUITY HOLDERS OF THE PARENT 731 (10) Earnings per share - basic (pence) 12.8 (19.2)- diluted (pence) 12.0 (19.2) All amounts relate to continuing operations. CONSOLIDATED BALANCE SHEET As at 31 December 2006 2006 2005 £'000 £'000 £'000 £'000 ASSETS NON-CURRENT ASSETSIntangible assets 2,596 -Property, plant and equipment 3,797 - 6,393 - CURRENT ASSETSInventories 722 -Trade and other receivables 1,998 -Cash and cash equivalents 1,288 264 4,008 264 TOTAL ASSETS 10,401 264 LIABILITIES CURRENT LIABILITESBank overdraft 189 -Trade and other payables 1,108 12Financial liabilities 96 -Other financial liabilities 70 -Current tax liabilities 451 - 1,914 12NON-CURRENT LIABILITESFinancial liabilities 526 -Long term provisions 265 -Deferred tax liabilities 500 - 1,291 - TOTAL LIABILITES 3,205 12TOTAL NET ASSETS 7,196 252 CAPITAL AND RESERVESATTRIBUTABLE TO EQUITY HOLDERSOF THE COMPANYShare capital 739 26Share premium 5,527 236Share option reserve 209 -Retained earnings 721 (10) TOTAL EQUITY 7,196 252 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2006 Share Share Share Retained Total Capital Premium Option Earnings Reserve £'000 £'000 £'000 £'000 £'000 Changes in equity Balance at 31 December 2005 26 236 - (10) 252 Retained profit for the - - - 731 731financial year Total recognised income and - - - 731 731expense for the year Issue of share capital 704 6,334 - - 7,038Bonus issue of shares 9 (9) - - -Equity share optionsgranted in respect ofcapital raising expenses - (200) 200 - -Share option expense - - 9 - 9Capital raising expenses - (834) - - (834) 713 5,291 209 731,31 6,944 Balance at 31 December 2006 739 5,527 209 721 7,196 For the year ended 31 December 2005 Share Share Share Retained Total Capital Premium Option Earnings Reserve £'000 £'000 £'000 £'000 £'000Changes in equity Retained (loss) forfinancial year andrecognised income andexpense forthe year - - - (10) (10)Issue of share capital 26 236 - 262 Balance at 31 December 2005 26 236 - (10) 252 CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 December 2006 2006 2005 £'000 £'000OPERATING ACTIVITIESNet profit/(loss) from ordinary activities 1,089 (10)before taxation Adjustments for:Amortisation of intangible fixed assets 78 -Amortisation of capitalised debt fee 16 -Depreciation of tangible fixed assets 225 -Investment income (14) (1)Taxation (334) -Finance costs 43 -Share option expense 9 - 1,112 (11)Increase in inventories (122) -Increase in receivables (96) -Increase in payables 41 11 CASH GENERATED FROM OPERATIONS 935 -Finance costs (43) - NET CASH FROM OPERATING ACTIVITES 892 - CASH FLOWS FROM INVESTING ACTIVITIESFinance income 14 1Acquisition of subsidiary undertaking (net of (5,411) -cash acquired)Purchase of property, plant and equipment (589) -Expenditure on research and development (4) - Net cash used in investing activities (5,990) 1 CASH FLOWS FROM FINANCING ACTIVITIESProceeds from share capital issued 6,438 263Costs of share capital issued (834) -Proceeds from bank borrowings 750 -Repayment of bank borrowings (293) -Cost of raising bank borrowings (128) - Net cash flow from financing activities 5,933 263 NET INCREASE IN CASH AND CASH EQUIVALENTS 835 264Cash and cash equivalents at beginning of 264 -period Cash and cash equivalents at end of period 1,099 264 During the period the Group acquired property, plant and equipment with anaggregate cost of £648,669 of which £59,529 was acquired by means of financeleases. Cash payments of £589,140 were made to purchase property plant andequipment. Notes to the preliminary statement for the year ended 31 December 2005 BASIS OF PREPARATION OF THESE FINANCIAL ACCOUNTS These preliminary results for the year ended 31 December 2006 have beenprepared in accordance with International Financial Reporting Standards(IFRSs and IFRIC interpretations) issued by the International AccountingStandards Board (IASB) and with those parts of the Companies Act 1985applicable to companies preparing their accounts under IFRS. This is thefirst time the Company has prepared its preliminary results in accordancewith IFRSs, having previously prepared its preliminary results inaccordance with UK accounting standards. Details of how the transitionfrom UK accounting standards to IFRSs has affected the Group's reportedfinancial position, financial performance and cash flows are given in note2. The preliminary results for the year ended 31 December 2006 have beenprepared under the historical cost convention and in accordance withapplicable accounting standards. The principal accounting policies adopted in the preparation of thesepreliminary results are set out below. The policies have been consistentlyapplied to all the years' presented, unless otherwise stated. BASIS OF CONSOLIDATION The preliminary results consolidate the accounts of Northbridge IndustrialServices plc and its Subsidiary undertaking. The results of the subsidiary acquired during the year are included fromthe effective date of acquisition. Intercompany transactions and balances between companies are eliminated infull. REVENUE Revenue comprises revenue recognised by the company in respect of goodsand services supplied, exclusive of Value Added Tax and trade discounts. Sales are recognised when the goods are despatched. Hire sales arerecognised over the period of hire. INTANGIBLE FIXED ASSETS AND AMORTISATION Development ProductsExpenditure on internally developed products is capitalised if it can bedemonstrated that: • it is technically feasible to develop the product for it to be sold;• adequate resources are available to complete the development;• there is an intention to complete and sell the product;• the group is able to sell the product;• sale of the product will generate future economic benefits; and• expenditure on the project can be measured reliably. Capitalised development costs are amortised over seven years. Theamortisation expense is included within the selling and distribution costline in the income statement. Development expenditure not satisfying the above criteria and expenditureon the research phase of internal projects are recognised in the incomestatement under cost of sales. Customer relationshipsCustomer relationships in acquired companies are valued by an independentexpert valuer and amortised over their expected useful life. Currentexperience has shown this to be ten years. Customer ordersCustomer orders in acquired companies are valued by an independent expertvaluer and amortised over their expected useful life. Current experiencehas shown this to be less than one year. GOODWILLGoodwill represents the excess of the cost of a business combination overthe interest in the fair value of the identifiable assets, liabilities andcontingent liabilities acquired. Cost comprises the fair value of assetsgiven, liabilities assumed and equity instruments issued, plus any directcost of acquisition. Goodwill is capitalised as an intangible asset with any impairment incarrying value being charged to the income statement. Where the fair value of identifiable assets, liabilities and contingentliabilities exceed the fair value of consideration paid, the excess iscredited in full to the income statement. Impairment tests on the goodwill are undertaken annually on 31 December.The company carries out an impairment review through the process ofevaluation, review and discussion, relating the acquired goodwill to thecurrent trading performance of the Subsidiary. BORROWING COSTSFees incurred on the raising of bank loans are capitalised and amortisedover the loan repayment period. PROPERTY, PLANT AND EQUIPMENT Tangible non-current assets are stated at cost less depreciation.Depreciation is provided at rates calculated to write off the cost oftangible assets, less their estimated residual value, over their expecteduseful lives on the following bases: Freehold property - 2% straight line Plant & machinery - 10% reducing balance Motor vehicles - 25% reducing balance Fixtures & fittings - 10-33% reducing balance and straight line Hire equipment - 10% straight line No depreciation is charged on assets in the course of construction. LEASING AND HIRE PURCHASE Where substantially all of the risks and rewards incidental to ownershipof a leased asset have been transferred to the group (a "finance lease"),the asset is treated as if it had been purchased outright. The amountinitially recognised as an asset is the fair value or, if lower, thepresent value of the minimum lease payments payable over the term of thelease. The corresponding lease commitment is shown as a liability. Leasepayments are analysed between capital and interest. The interest elementis charged to the income statement over the period of the lease and iscalculated so that it represents a constant proportion of the leaseliability. The capital element reduces the balance owed to the lessor. Where substantially all of the risks and rewards incidental to ownershipare retained by the lessor (an "operating lease"), the total rentalspayable under the lease are charged to the income statement on astraight-line basis over the lease term INVENTORIES Inventories are valued at the lower of cost and net realisable value aftermaking due allowance for obsolete and slow-moving items. Cost includes alldirect costs and an appropriate proportion of fixed and variableoverheads. DEFERRED TAXATION Deferred tax assets and liabilities are recognised where the carryingamount of an asset or liability in the balance sheet differs to its taxbase, except for differences arising on: • the initial recognition of goodwill;• goodwill for which amortisation is not tax deductible;• investments in subsidiaries where the company is able to control thetiming of the reversal of the difference and it is probable that thedifference will not reverse in the foreseeable future. Recognition of deferred tax assets is restricted to those instances whereit is probable that taxable profit will be available against which thedifference can be utilised. The amount of the asset or liability is determined using tax rates thathave been enacted or substantially enacted by the balance sheet date andare expected to apply when the deferred tax liabilities/(assets) aresettled/(recovered). Deferred tax assets and liabilities are offset when the group has alegally enforceable right to offset current tax assets and liabilities andthe deferred tax assets and liabilities relate to taxes levied by the sametax authority on either : • The same taxable group company: or• Different group entities which intend either to settle current taxassets and liabilities on a net basis, or to realise the assets and settlethe liabilities simultaneously, in each future period in which significantamounts of deferred tax assets or liabilities are expected to be settledor recovered. FOREIGN CURRENCIESTransactions entered into by the group entities in a currency other thanthe primary economic environment in which it operates ("the functionalcurrency") are recorded at the rates prevailing when the transactionsoccur. Foreign currency monetary assets and liabilities are translated atthe rates prevailing at the balance sheet date. Exchange differencesarising on the retranslation of unsettled monetary assets and liabilitiesare similarly recognised immediately in the income statement. PENSIONSContributions to defined contribution pension schemes are charged to theincome statement in the year to which they relate. FINANCIAL ASSETS AND LIABILITIES Financial AssetsThe company classifies its financial assets into one of the followingcategories, depending on the purpose for which it was acquired: Loans and receivables: These assets are non-derivative financial assets with fixed ordeterminable payments that are not quoted in an active market. They ariseprincipally through the provision of goods and services to customers(trade debtors), but also incorporate other types of contractual monetaryasset. They are carried at cost less any provision for impairment. Financial LiabilitiesThe company classifies its financial liabilities as other financialliabilities: Other financial liabilities: include the following items: • Trade payables and other short term monetary liabilities, which are recognised at amortised cost.• Bank borrowings are initially recognised at the amount advanced net of any transaction costs directly attributable to the issue of the instrument. Interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance sheet. SHARE BASED PAYMENTS Where share options are awarded to employees, the fair value of theoptions at the date of grant is charged to the income statement over thevesting period. Non-market vesting conditions are taken into account byadjusting the number of equity instruments expected to vest at eachbalance sheet date so that, ultimately, the cumulative amount recognisedover the vesting period is based on the number of options that eventuallyvest. Market vesting conditions are factored into the fair value of theoptions granted. As long as all other vesting conditions are satisfied, acharge is made irrespective of whether the market vesting conditions aresatisfied. The cumulative expense is not adjusted for failure to achieve amarket vesting condition. Where the terms and conditions of the options are modified before theyvest, the increase in the fair value of the options, measured immediatelybefore and after the modification, is also charged to the income statementover the vesting period. Share options granted in respect of external services have been measuredby reference to the fair value of the service received. Where these costsrelate to the issue of new shares then the expense is accounted for inaccordance with the accounting policy below. SHARE ISSUE AND FLOTATION COSTS Costs associated with the raising of share capital are credited directlyto the share premium account within equity. Flotation costs have been apportioned between those shares that existedprior to flotation and shares that were issued as part of the flotation.Such costs have been charged to the income statement or directly toequity. NEW STANDARDS AND INTERPRETATIONS In preparing the preliminary results, the company has not applied the followingnew standards and interpretations that have been issued but are not yeteffective: Standards, amendments to standards and interpretations endorsed by the EU Title Implementation Anticipated effect on the group IFRS 7: Financial Periods commencing on Additional disclosuresInstruments: or after 1 January 2007 onlyDisclosuresIAS 1 (Amendment) - Periods commencing on Additional disclosures onlyCapital Disclosures or after 1 January 2007 IFRIC 7: Applying the Periods commencing on NoneRestatement Approach or after 1 March 2006under IAS 29 FinancialReporting inHyperinflationaryEconomiesIFRIC 9: Reassessment Periods commencing on Unlikely to have aof Embedded Derivatives or after 1 June 2006 material effect Standards, amendments to standards and interpretations not currently endorsed bythe by EU Title Implementation Anticipated effect on the groupIFRS 8: Operating Periods commencing on Additional disclosuresSegments or after 1 January 2009 only IFRIC 10: Interim Periods commencing on NoneFinancial Reporting and or after 1 NovemberImpairment 2006 IFRIC 11: IFRS 2 - Periods commencing on NoneGroup and Treasury or after 1 March 2007Share TransactionsIFRIC 12: Service Periods commencing on Unlikely to have aConcession Arrangements or after 1 January 2008 material effect CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The preparation of consolidated financial results under IFRS requires theGroup to make estimates and assumptions that affect the application ofpolicies and reported amounts. Estimates and judgements are continuallyevaluated and are based on historical experience and other factorsincluding expectations of future events that are believed to be reasonableunder the circumstances. Actual results may differ from these estimates.The estimates and assumptions which have a significant risk of causing amaterial adjustment to the carrying amount of assets and liabilitieswithin the next financial year are discussed below: Estimated impairment of goodwill The Group is required to test whether goodwill has suffered anyimpairment. The recoverable amounts of cash generating units have beendetermined based on value-in-use estimations. The use of this methodrequires the estimation of future cash flows expected to arise from thecontinuing operation of the cash generating unit. Actual outcomes couldvary significantly from these estimates. Impairment of assets Property, plant and equipment are reviewed for impairment if events orchanges in circumstances indicate that the carrying amount may not berecoverable. When a review for impairment is conducted, the recoverableamount of an asset or a cash generating unit is determined based onvalue-in-use calculations prepared on the basis of management'sassumptions and estimates. Provisions Provisions have been made for employment costs. These provisions areestimates and the actual costs and timings of future cash flows aredependent upon future events. Any difference between expectations and theactual future liability will be accounted for in the period when suchdetermination is made. Income taxes The Group recognises expected liabilities for tax based on an estimationof the likely taxes due, which requires significant judgement as to theultimate tax determination of certain items. Where the actual liabilityarising from these issues differs from these estimates, such differenceswill have an impact on income tax and deferred tax provisions in theperiod when such determination is made. SEGMENT INFORMATION The group's primary reporting format for reporting segment information isgeographical segments. The entire turnover arises from the group's continuing principal activity, whichthe directors believe to be the only class of business carried out by the group. 2006 2005 UK Germany Total UK Germany Total £'000 £'000 £'000 £'000 £'000 £'000 Revenue 6,776 157 6,933 - - -Profit/(loss) 1,066 23 1,089 (10) - (10)before taxation Balance sheetAssets 10,247 154 10,401 264 - 264Liabilities (3,201) (4) (3,205) (12) - (12) 7,046 150 7,196 252 - 252Other Capital 88 1 589 - - -expenditure Depreciation 216 6 222 - - - External revenue by customer location 2006 2005 £'000 £'000UK 2,143 -USA 2,416 -Far East 1,366 -Other 1,008 - 6,933 - Whilst the Group is involved in both the hire and sale of load bank equipment,the business organisational structure and its internal financial reportingsystem is such that there is one business segment. INCOME TAX EXPENSE 2006 2005 £'000 £'000 Current tax expense 343 -Deferred tax expense resulting from the 14 -origination and reversal of temporarydifferences TAX ON PROFIT ON ORDINARY ACTIVITIES 357 - FACTORS AFFECTING TAX CHARGE FOR THE YEAR The tax assessed for the year is higher than the standard rate of corporationtax in the UK (30%). The differences are explained below: 2006 2005 £'000 £'000Profit/(loss) on ordinary activities before tax 1,089 (10) 327 (3) Profit/(loss) on ordinary activities multipliedby standard rate of corporation tax in the UK of30% (2005 : 30 %) EFFECTS OF:Tax loss available to carry forward -Expenses not allowable for tax purposes 27 -Other differences 3 - CURRENT TAX CHARGE FOR THE YEAR (see note above) 357 - FACTORS THAT MAY AFFECT FUTURE TAX CHARGE There are no factors that may affect future tax charges NOTE SUPPORTING EARNINGS PER SHARE 2006 2005Numerator Earnings used in basic and diluted 731 (10)EPS £'000 Denominator Weighted average number of shares 5,711,064 51,029used in basic EPSEffects of: -- employee share options 204,986 -- consultant share options 73,072 Weighted average number of shares 6,089,122 51,029used in diluted EPS NOTE SUPPORTING CASH FLOW STATEMENT 2006 2005 £'000 £'000Cash and cash equivalentscomprises: Cash available on demand 1,288 264Overdrafts (189) - 099 264 NOTE SUPPORTING THE DIVIDENDS The directors are proposing a final dividend of 2.0 pence (2005: Nil) pershare totalling £147,770 (2005: Nil). The dividend has not been accrued at thebalance sheet date. NOTE SUPPORTING POST BALANCE SHEET EVENT On the 23 March 2007, Crestchic Limited acquired the Assets, Customer listsand Goodwill of the loadbank hire division of TGC International Limited for£900,000. On the basis that this acquisition occurred on the date that thesepreliminary results were approved and authorised for issue it is impracticalto disclose the fair values of the assets acquired as it has not yet beenpossible to ascertain this information. This information will however beincluded in the 2007 preliminary results. This information is provided by RNS The company news service from the London Stock Exchange