Pennant International Regulatory News (PEN)

3 Apr 2006 07:01

Pennant International Group PLC03 April 2006 3 April 2006 Pennant International Group plc Preliminary results for year ending 31 December 2005 Pre-Tax Profits up 315%; Increased Final Dividend Pennant International Group plc, ("Pennant" or the "Company") quoted on AIM,announces preliminary results for the year ended 31 December 2005. Pennant is aleading supplier of technology solutions to the defence and industrial sectors,including specialist software, technical data services and data managementsystems, simulation and training systems. Commenting on the results, Chairman Christopher Powell said:"The strategy of concentrating on core skills and building relationships withexisting and new customers through good service and quality products hasimproved profitability in 2005 and is expected to continue to do so in thefuture." Highlights: Group profit before tax of £450,561 (2004: £103,283) an increase of 315%.Increased final dividend of 0.31p per share (2004: 0.27p) - making total cashdividend for the year of 0.44p per share (2004: 0.40p).Strong cash position with net debt down to £261,795; Gearing further reduced to6.5% (2004: 9.6%)New customers won during the year include Man ERF UK Limited and AustralianAerospace; Joint Venture with Sonovision, of France now operational and inprofit.New or renewed contracts awarded since year end include MOD service provisioncontract worth an initial £3.8million. On prospects, Mr Powell added: "The UK MOD is currently in the middle of a transformation involving a series ofnew "platforms which bring with them requirements for training, technicaldocumentation and through life support products. We believe that the Group hasthe skills and experience and is well placed, through its major customers, tobenefit from these opportunities. There is also considerable overseas interestin the Group's products in the defence sector. "The strong balance sheet and positioning for future opportunities gives yourBoard continued confidence." For further information contact: Pennant International Group plc Tel: 01452 714881Chris Snook, Chief ExecutiveJohn Waller, Finance DirectorW.H. Ireland Tel: 0121 616 2101Tim CofmanWinningtons Financial Tel: 0117 920 0092Paul Vann CHAIRMAN'S STATEMENT I am pleased to report a significant increase in profits and dividend and astrengthened balance sheet. During the year the Group has concentrated on increasing profitability bybuilding on core strengths, improving efficiency and enhancing its reputationfor quality, delivery and focus on customer requirements. Efforts continue to bemade to build new relationships and to establish the Group in new sectorsappropriate to its core skills. This strategy is proving successful.Profitability has improved significantly, a number of new contracts have beenwon and service and framework agreements, giving ongoing revenue streams, havebeen renewed and/or extended. Tendering activity continues both for short andlonger term prospects where, in a number of cases, the Group is supporting majorprime contractors. The Group announced on 23 February 2006, that it had exchanged conditionalcontracts for the sale of a property in Southampton. The property is no longersuitable for the Group's needs. The sale is conditional upon the purchaser beingable to obtain satisfactory planning permission within 9 months of the date ofexchange. The agreed sale price is not less than £721,000 in cash. If, asexpected, this transaction is completed it will realise a profit ofapproximately £300,000 and a cash inflow of approximately £700,000. RESULTS AND DIVIDEND Group profit on ordinary activities before tax was £450,561 (2004: £103,283).Earnings per share were 1.33p (2004: 0.32p) an increase of 315%. The Group's cash position remains strong, with net debt of £261,795 (2004:£358,281). Gearing is 6.5% (2004: 9.6%). Your Board is recommending a final cash dividend of 0.31p per share (2004:0.27p) which, together with the interim dividend of 0.13p, gives a totaldividend for the year of 0.44p per share (2004: 0.4p), an increase of 10%. Thistotal dividend is 3 times covered by earnings. The final dividend will be paidon 26 May 2006 to shareholders on the Register at the close of business on 26April 2006. The shares are expected to go ex dividend on 24 April 2006. The dividend reflects your Board's continued confidence in the future havingregard to improved trading and current prospects. On 8 December 2005 the Company made a market purchase of 434,000 of its ownshares at 11.5p per share. The shares will be held in treasury where they willbe available for sale or to satisfy possible future requirements arising fromthe Group's share option scheme. This is the only holding of treasury shares theCompany has. CURRENT TRADING Training Systems which supplies training solutions to the defence, aviation andindustrial markets, has traded profitably and continues to work closely with theMinistry of Defence ("MOD"), BAE Systems, Agusta Westland and others, both oncurrent contracts and future prospects. Its products include simulation trainingsystems, computer based training and emulation. Examples of major contracts wonor renewed, and which help to underpin trading for 2006 and beyond, include: A service provision contract for the MOD for 5 years to 2011 with an option toextend for a further 2 years. The contract is worth an initial £3.8 million andhas provision for additional services throughout the life of the contract whichcould significantly enhance its overall value. Under the contract PennantTraining Systems Limited supports training equipment at six militaryestablishments.A contract to supply courseware to the MOD. The contract will generate revenuesuntil 2009 and the MOD has options to extend for a further two one yearperiods.A multi million pound contract to supply a Computer Aided Learning System to amajor customer that will run into 2008.Selection, teamed with Carley Corporation, by Northrupp Grumman Corporation toprovide CBT development support to the F-35 Joint Strike Fighter programme. Technical Data Services has continued to undertake tasking under a number ofongoing enabling contracts with the MOD, BT, General Dynamics and others. It hasalso been busy with a number of specific contracts including: The previously announced contract with Kawasaki Heavy Industries fordocumentation and training in respect of the operation and maintenance of therolling stock for the Taipei Light Railway.A number of e-learning programmes for the Department of Work and Pensions.The first tranches of work, through BAE Systems, carrying out maintenance taskanalysis and the development of maintenance procedures for the Type 45Destroyer. The Joint Venture Company (Pennant Sonovision - ITEP Limited) is now establishedwith an office in Bristol. It made a small profit in its first period oftrading. It is engaged in the provision of technical documentation andengineering services to Airbus UK Limited and is expected to grow in 2006. The Software subsidiary's product (OmegaPS suite) assists the operators ofcomplex assets, such as ships, aeroplanes and tanks etc, to manage and supportthem through life. The product is widely used by defence authorities andcontractors around the world. Product sales generate ongoing revenues in theform of maintenance contracts for the support of the software and from relatedconsultancy services. In Australia and Canada the product is effectively mandated by the defenceauthorities. In both countries Pennant has continued to provide the authoritieswith support and consultancy services under ongoing contractual relationships.New customers won during the year include Zhe Jiang Zhong Yuan Electric Co Ltdin China, PSC - Naval Dockyard in Malaysia, Oerlikan Contraves AG inSwitzerland, Rheinmetal Defence Electronics in Germany, Man Erf UK Limited andAustralian Aerospace. PROSPECTS As set out in the Defence Industrial Strategy White Paper issued in December2005, the UK MOD is currently in the middle of a transformation involving aseries of new "platforms" including the future aircraft carriers, Type 45destroyers, new medium weight fighting vehicles, Super Lynx helicopters, A400Mtransport aircraft and Joint Strike Fighter. These "platforms" bring with themrequirements for training, technical documentation and through life supportproducts. We believe that the Group has the skills and experience and is wellplaced, through its major customers, to benefit from these opportunities. Thereis also considerable overseas interest in the Group's products in the defencesector.In other sectors there are good overseas opportunities particularly in rail and,in the expanding UK market, for e-learning products. REDUCTION OF SHARE CAPITAL As set out and explained in the Notice of AGM, the Directors are proposing aresolution to reduce the share capital of the Company by the cancellation of allthe deferred shares of 15p each thereby improving the Company's balance sheet bycreating additional distributable reserves. The Directors consider that thecapital reduction is in the best interests of the shareholders and of theCompany. They unanimously recommend that the shareholders vote in favour of theresolution as they intend to do in respect of their own shareholdings totalling35.05% of the Company's existing issued share capital. CONCLUSION The strategy of concentrating on core skills and building relationships withexisting and new customers through good service and quality products hasimproved profitability in 2005 and is expected to continue to do so in thefuture. The strong balance sheet and positioning for future opportunities givesyour Board confidence for the future. I thank my colleagues and all employees for their considerable efforts during asuccessful year. C C PowellChairman Group Profit and Loss AccountFor the year ended 31 December 2005 Notes 2005 2004 £ (as restated) £Turnover: Group and share of joint venture 10,784,644 11,550,645Less: share of joint venture turnover (222,896) - --------- ----------Group turnover 1 10,561,748 11,550,645 Cost of sales (6,164,512) (7,332,524) --------- ---------- Gross profit 4,397,236 4,218,121Administration expenses (3,864,325) (4,035,503) --------- ---------- Group operating profit 2 532,911 182,618Share of operating profit in joint venture 4,836 - --------- ---------- Profit on ordinary activities before 537,747 182,618interestInterest receivable and similar income 1,137 6,332Interest payable - Group 4 (86,799) (85,667)- Joint venture (1,524) - --------- ---------- Profit on ordinary activities before 450,561 103,283taxationTax on profit on ordinary activities 5 (24,937) (2,457)- Group- Joint venture (1,166) - --------- ----------Profit on ordinary activities aftertaxationfor Group and its share of joint ventureattributable to members of the parent 424,458 100,826undertaking ========= ========== Earnings per share 7Basic 1.33p 0.32pDiluted 1.22p 0.29p Group Statement of Total Recognised Gains and LossesFor the year ended 31 December 2005 Notes 2005 2004 £ £Profit for the financial year 424,458 100,826Prior year adjustment 19 86,400 -Currency translation differences on foreigncurrency net 34,609 (56,289)investments --------- ----------Total gains and losses recognised since last annualreport 545,467 44,537 ========= ========== Group Balance SheetAs at 31 December 2005 Notes 2005 2004 £ (as restated) £Fixed assetsIntangible assets 8 857,604 1,060,569Tangible assets 9 2,561,663 2,670,671Investments 10 6,135 6,135Investment in joint venture - share ofgross 155,346 -assetsInvestment in joint venture - share ofgross (148,200) -liabilities --------- --------- 7,146 - --------- --------- 3,432,548 3,737,375Current assetsStocks 11 750,884 510,860Debtors 12 2,344,685 1,719,936Cash at bank and in hand 939,798 1,242,152 --------- --------- 4,035,367 3,472,948Creditors: amounts falling due within oneyear 13 (2,521,168) (2,430,560) --------- ---------Net current assets 1,514,199 1,042,388 --------- ---------Total assets less current liabilities 4,946,747 4,779,763 Creditors: amounts falling due after morethan one year 14 (919,918) (1,050,091) Provisions for liabilities and charges 15 (16,000) - --------- --------- 4,010,829 3,729,672 ========= =========Capital and reservesCalled up share capital 16 3,045,400 3,045,400Share premium 17 3,563,504 3,563,504Profit and loss account 17 (2,598,075) (2,879,232) --------- ---------Shareholders' funds 18 4,010,829 3,729,672 ========= ========= Group Cashflow StatementFor the year ended 31 December 2005 Notes 2005 2004 £ £Net cash (outflow)/inflow from operatingactivities 26 484,238 (7,917)Returns on investments and servicing of finance 27 (85,662) (79,335)Taxation (32,257) (19,202)Capital expenditure 27 (71,407) (222,588)Acquisitions and disposals 27 (5,000) -Equity dividends (128,000) (169,600) --------- ----------Cash inflow/(outflow) before financing 161,912 (498,642)Financing 27 (179,320) (651,923) --------- ----------(Decrease) in cash 29 (17,408) (1,150,565) ========= ========== The financial statements were approved by the Board on 30 March 2006 C Snook J M WallerDirector Director Notes to the Financial StatementsFor the year ended 31 December 2005 1. Turnover The Group's turnover is attributable to its one principal activity. The geographical analysis of turnover by destination is as follows: 2005 2004 £ £United Kingdom 7,133,380 8,436,955Europe 255,245 573,808USA and Canada 2,154,638 1,598,783Australasia 741,899 919,974Africa 34,599 5,400Far East 25,125 11,045Middle East 216,862 4,680 -------------- ------------ 10,561,748 11,550,645 ============== ============ The geographical analysis of turnover by origin isas follows: 2005 2004 £ £United Kingdom 8,047,007 9,308,939USA and Canada 2,089,517 1,569,420Australasia 425,224 672,286 -------------- ------------ 10,561,748 11,550,645 ============== ============ 2. Operating profit/(loss) The operating profit is stated after charging/ 2005 2004(crediting): £ £Depreciation of tangible fixed assets 202,236 191,028Profit on sale of tangible fixed assets (3,433) (11,324)Amortisation of intangible fixed assets 203,439 206,940Loss on foreign exchange transactions 48,734 14,777Operating leases - property 128,502 134,707- plant and machinery 71,732 80,674Rents receivable - -Restructuring costs 128,861 130,689 ============== ============ 3. Auditors' remuneration, including non-cash benefits 2005 2004 £ £Audit services 36,500 36,500Taxation services 1,835 3,290Other services 800 7,430 -------------- ------------ 39,135 47,220 ============== ============ Audit services include fees in respect of the Group audit and fees for otherservices required by statute or regulation. Taxation services consist of taxcompliance services and tax advice. Other services consist of advice withingroup restructuring and the tax implications. 4. Interest payable 2005 2004 £ £On bank loans and overdrafts 11,646 4,918On loans repayable after five years 73,634 80,749On overdue tax 283 -On hire purchase 1,236 - -------------- ------------ 86,799 85,667 ============== ============ 5. Taxation 2005 2004 £ £UK corporation taxCurrent 733 544Prior year adjustment - (1,791) -------------- ------------ 733 (1,247)Foreign taxCurrent 22,128 (6,596)Prior year adjustment (8,137) - -------------- ------------ 13,991 (6,596) -------------- ------------Current tax charge/(credit) 14,724 (7,843) Deferred taxDeferred tax charge 11,379 10,300 -------------- ------------Tax on profit on ordinary activities 26,103 2,457 ============== ============Tax charge relates to the followingPennant International Group plc 24,937 2,457Joint venture 1,166 - -------------- ------------ 26,103 2,457 ============== ============ Factors affecting the tax charge for the yearProfit on ordinary activities before taxation 450,561 103,283 ============== ============ Profit on ordinary activities before taxationmultiplied by standard rate of UK corporation tax of30% (2003 - 30%) 135,168 30,985 -------------- ------------Effects of:Non deductible expenses 5,305 6,930Depreciation 62,810 109,503Capital allowances (46,203) (56,663)Tax losses (142,066) (41,066)Other tax adjustments (290) (55,741)Adjustment to tax charge in respect of previous - (1,791)periods -------------- ------------ (120,444) (38,828) -------------- ------------Current tax charge/(credit) 14,724 (7,843) ============== ============ The Group has estimated UK losses of £2,022,000 (2004 - £2,560,000) availablefor carry forward against future trading profits. 6. Dividends 2005 2004Ordinary shares of 5p each:Dividends paid 128,000 169,600 ============== ============ Equity shares 128,000 169,600 ============== ============ 7. Earnings per share Earnings per share has been calculated by dividing the profit attributable toshareholders by the weighted average number of ordinary shares in issue duringthe year as follows: 2005 2004 £ £Profit after tax attributable to shareholders 424,458 100,826 ============== ============ Number NumberWeighted average number of ordinary shares in issueduring the year 31,971,463 32,000,000Diluting effect of share options 2,777,500 2,564,500 -------------- ------------Diluted average number of ordinary shares 34,748,963 34,564,500 ============== ============ Earnings per share p pBasic 1.33 0.32 -------------- ------------Diluted 1.22 0.29 ============== ============ 8. Intangible fixed assets Positive Negative Development Total goodwill goodwill expenditure £ £ £ £CostAt 1 January2005 and at 31December 2005 1,243,731 (69,234) 922,045 2,096,542 --------- --------- ---------- --------- AmortisationAt 1 January2005 279,238 (17,310) 774,045 1,035,973Exchangedifference onopeningbalance (474) - - (474)Charge/(credit) for the year 58,901 (3,462) 148,000 203,439 --------- --------- ---------- ---------At 31 December2005 337,665 (20,772) 922,045 1,238,938 --------- --------- ---------- --------- Net book valueAt 31 December2005 906,066 (48,462) - 857,604 ========= ========= ========== =========At 31 December2004 964,493 (51,924) 148,000 1,060,569 ========= ========= ========== ========= 9. Tangible fixed assets Long Short Freehold Plant Motor leasehold leasehold land and Equipment vehicles Total land and land and buidings fixtures & buildings buildings fittings £ £ £ £ £ £Cost or valuationAt 1January 576,892 70,737 1,587,858 3,093,412 62,591 5,391,4902005Exchangedifferenceonopening - - - 22,492 470 22,962balanceAdditions 46,690 - - 48,351 10,266 105,307Disposals - - - (34,498) (21,363) (55,861) -------- -------- -------- -------- -------- --------At 31December 623,582 70,737 1,587,858 3,129,757 51,964 5,463,8982005 ======== ======== ======== ======== ======== ======== DepreciationAt 1 January2005 31,068 4,433 200,126 2,437,408 47,784 2,720,819Exchangedifference onopening balance - - - 19,813 277 20,090Charge for theyear 5,458 663 13,877 180,349 1,889 202,236Disposals - - - (34,499) (6,411) (40,910) -------- -------- -------- -------- -------- --------At 31 December2005 36,526 5,096 214,003 2,603,071 43,539 2,902,235 ======== ======== ======== ======== ======== ======== Net book valueAt 31 December2005 587,056 65,641 1,373,855 526,686 8,425 2,561,663 -------- -------- -------- -------- -------- --------At 31 December2004 545,824 66,304 1,387,732 656,004 14,807 2,670,671 ======== ======== ======== ======== ======== ======== The freehold land and buildings include a revalued asset owned by a subsidiarywhich was valued on an open market basis in 1988 by a firm of independentChartered Surveyors. Comparable historical cost for the land and buildings included at valuation:Cost £At 1 January 2005 and at 31 December 510,8942005 -------- Depreciation based on costAt 1 January 2005 86,598Charge for the year 4,091 --------At 31 December 2005 90,689 -------- Net book valueAt 31 December 2005 420,205 -------- --------At 31 December 2004 424,296 ======== Included in freehold land and buildings is a non-depreciable asset of £101,789(2004-£101,789) Included above are assets held under finance leases or hire purchase contractsas follows: Motor vehicles £Net book valuesAt 31 December 2005 11,739 ==========At 31 December 2004 - ========== Depreciation charge for the year31 December 2005 1,944 ==========31 December 2004 - ========== 10. Investments 2005 2004 £ £Quoted (note 10a) 6,135 6,135Joint venture - Group share of net assets (note 10b) 7,146 - ---------- ---------- 13,281 6,135 ========== ========== 10a. Market values Quoted 5,625 7,625 ========== ========== 10b. Joint venture Pennant International Group plc has a 50% interest, consisting of 5,000 OrdinaryShares, in Pennant Sonovision ITEP Ltd, a joint venture with Sonovision ITEP SASof France. The joint venture was established in 2005 to provide technicaldocumentation for European aerospace industry customers. The company is based inFilton, Bristol, England and is headed by a board of directors with equalrepresentation from both shareholders. 11. Stocks 2005 2004 £ £Raw materials and consumables 34,868 31,096Work in progress 716,016 479,764 ---------- ---------- 750,884 510,860 ========== ========== 12. Debtors Trade debtors 1,208,332 1,102,533Amounts recoverable on long-term contracts 838,165 387,079Other debtors 1,857 24,417Taxation recoverable - 8,000Prepayments 155,433 175,403Deferred tax asset (note 15) 28,198 22,504Amounts due from joint venture 83,500 -VAT recoverable 29,200 - ---------- ---------- 2,344,685 1,719,936 ========== ========== Amounts due from the joint venture are due after more than one year. They arerepayable in five annual instalments, with the first instalment becoming due forrepayment on 14 February 2008. Interest is being charged at 2% above the bankbase rate. 13. Creditors: amounts falling due within one year 2005 2004 £ (as restated) £Bank loans and overdrafts 278,817 550,342Trade creditors 555,636 520,430Corporation tax 31,184 56,812Social security and other taxes 505,883 479,685Net obligations under hire purchase contracts 2,858 -Payments received on account 114,000 33,000Other creditors 300,993 218,177Accruals and deferred income 651,445 571,949Dividends payable 165 165Amounts due to joint venture 80,187 - ---------- ---------- 2,521,168 2,430,560 ========== ========== 14. Creditors: amounts falling due after more than one year 2005 2004 £ £Bank loans 909,657 1,050,091Net obligations under hire purchase contracts 10,261 - ---------- ---------- 919,918 1,050,091 ========== ==========Analysis of loansNot wholly repayable within five years by instalments 1,046,352 1,173,365Included in current liabilities (136,695) (123,274) ---------- ---------- 909,657 1,050,091 ---------- ----------Instalments not due within five years 268,059 467,977 ========== ==========Loan maturity analysisIn more than one year but not more than two years 145,580 131,595In more than two years but not more than five years 496,018 450,519In more than five years 268,059 467,977 ========== ========== Bank loans of £1,046,352 (2004 - £1,173,365 ) are secured by fixed and floatingcharges over the assets of Pennant International Group plc, Pennant TrainingSystems Limited, Pennant Software Services Limited and Pennant InformationServices Limited, and are repayable by monthly instalments and interest ischarged at 2% above the bank's base rate. Net obligations under hire purchase contracts 2005 2004 £ £Repayable within one year 2,858 -Repayable between one and five years 10,261 - ---------- ---------- 13,119 -Included in liabilities falling due within one year (2,858) - ---------- ---------- 10,261 - ========== ========== 15. Provisions for liabilities and charges Deferred taxation provided in the financial statements and the amounts notprovided are as follows: At 1 January 2005 (22,504) (32,804)Profit and loss account 11,379 10,300 ---------- ----------At 31 December 2005 (11,125) (22,504) ========== ========== Deferred tax relates to the following:Pennant International Group plc - Deferred tax asset(note 12) (28,198) (22,504)- Deferred tax liability 16,000 - ---------- ---------- (12,198) (22,504)Joint venture 1,073 - ---------- ---------- (11,125) (22,504) ========== ========== Not provided Provided 2005 2004 2005 2004 £ £ £ £Accelerated capital allowances - - 104,522 89,794Other timing differences - - (5,233) (5,275)Tax losses available - - (110,414) (107,023) --------- --------- --------- --------- - - (11,125) (22,504)Surplus on revaluation ofland and 32,000 30,000 -buildings --------- --------- --------- --------- 32,000 30,000 (11,125) (22,504) ========= ========= ========= ========= The deferred taxation liability on the surplus arising on the revaluation of thefreehold property has not been provided because there is little possibility ofthe property being sold in the foreseeable future. 16. Share Capital 2005 2004Authorised £ £51,092,000 Ordinary shares of 5p each 2,554,600 2,554,6009,636,000 Deferred shares of 15p each 1,445,400 1,445,400 ----------- ----------- 4,000,000 4,000,000 =========== =========== Allotted, called up and fully paid32,000,000 Ordinary shares of 5p each 1,600,000 1,600,0009,636,000 Deferred shares of 15p each 1,445,400 1,445,400 ----------- ----------- 3,045,400 3,045,400 =========== =========== On 8 December 2005 the company purchased 434,000 of its own Ordinary Shares of5p and holds these as Treasury Shares at the year end.The deferred shares: do not confer any right to attend or vote at general meetings;do not confer any right to participate in any dividends;in the case of a winding up of the Company are entitled as a class to £1 paidafter the holders of the ordinary shares;may be cancelled by the Company without making any payment. The number and exercise price of options under the Company's share option schemeat 31 December 2005 are: Option price Number of Exercise Per share Shares Dates1998 Share Option Scheme 122.50p 17,500 2003 to 2007 11.50p 460,000 2005 to 2012 10.00p 1,800,000 2006 to 2013 13.00p 500,000 2008 to 2015 ----------- 2,777,500 =========== 17. Statement of movements on reserves Share Profit Premium and loss £ account £Balance at 1 January 2005 as previously reported 3,563,504 (2,965,632)Prior year adjustment (note 19) - 86,400 ---------- ---------Balance at 1 January 2005 as restated 3,563,504 (2,879,232)Profit for the year - 424,458Dividends - (128,000)Currency translation differences on foreign currencynet investments - 34,609Purchase of treasury shares - (49,910) ---------- ---------Balance at 31 December 2005 3,563,504 (2,598,075) ========== ========= 18. Reconciliation of movements in shareholders' funds 2005 2004 £ £Profit for the financial year 424,458 100,826Dividends (128,000) (169,600)Purchase of treasury shares (49,910) -Other recognised gains and losses relating to the year 34,609 (56,289) ---------- ---------Net addition/(reduction) to shareholders' funds 281,157 (125,063)Opening shareholders' funds (originally £3,643,272before adding prior year adjustment of £86,400) 3,729,672 3,854,735 ---------- ---------Closing shareholders' funds 4,010,829 3,729,672 ========== ========= 19. Prior year adjustments Until 31 December 2004 it was the Group's policy to recognise proposed dividendsas a liability at the balance sheer date. In accordance with FRS 21 (effectivefrom 1 January 2005) proposed dividends are no longer considered to represent apresent obligation at the balance sheet date. Accordingly the proposed finaldividend for 2005 has not been provided as a liability. The comparative figureshave been restated accordingly. 20. Capital commitments There were no capital commitments at 31 December 2005 and 31 December 2004 21. Financial commitments At 31 December 2005 the Group had annual commitments under non-cancellableoperating leases as follows: Land and Buildings Other 2005 2004 2005 2004Expiry date: £ £Within one year - - 24,840 30,552Between two and five years 48,015 60,015 52,680 60,324In over five years 72,356 72,356 - - -------- -------- -------- -------- 120,371 132,371 77,520 90,876 ======== ======== ======== ======== On 14 February 2005 the Group entered into a commitment with Pennant SonovisionITEP Ltd to make available £120,000 of funds for a period of three years. At 31December 2005, £75,000 had been drawn down and £45,000 remains available. 22. Directors' emoluments 2005 2004 £ £Emoluments for qualifying services 226,283 265,065Pension contributions to money purchase schemes 12,350 13,845Amounts paid for directors' services 111,600 111,600 ---------- --------- 350,233 390,510 ========== =========The number of directors for whom retirement benefits areaccruing under money purchase pension schemes amounted to 2(2004: 3)Emoluments disclosed above include the following amountspaid to the highest paid director:Emoluments for qualifying services 112,607 123,042 ========== ========= 23. Employees Number of employees 2005 2004 Number NumberThe average monthly number of employees (includingdirectors) during the year was:Office and management 25 18Production 125 156Selling and distribution 11 11 ---------- --------- 161 185 ========== =========Employment costs £ £Wages and salaries 5,182,851 5,490,215Social security costs 437,539 529,994Other pension costs 215,514 210,715 ---------- --------- 5,835,904 6,230,924 ========== ========= 24. Pension costs Defined contributionThe Group operates a defined contribution pension scheme for its employees inthe United Kingdom. The assets of the scheme are held separately from those ofthe Group in an independently administered fund. The pension cost chargerepresents contributions payable by the Group to the fund.Contributions payable by the Group for the year 153,214 167,472Contributions payable to the fund at the year end andincluded in creditors 26,342 25,671 ========== ========= 25. Substantial shareholdings Ordinary shares of 5p eachNameRathbone Nominees Limited 4,256,351Dartington Portfolio Nominees Limited 3,381,671Capita Trust Co. Limited 1,741,850Pennine Downing AIM VCT 3 PLC 1,111,111Pennine Downing AIM VCT 5 PLC 1,111,111 ========= 26. Reconciliation of Group operating profit to net cash inflow/(outflow) from operating activities 2005 2004 £ £Operating profit 532,911 182,618Depreciation 202,236 191,028Profit on sale of tangible fixed assets (3,433) (11,324)Amortisation of intangible fixed assets 203,439 206,940(Increase)/decrease in stocks (240,024) 3,305(Increase)/decrease in debtors (627,055) 478,896Increase/(decrease) in creditors 384,903 (1,010,568)Other movements 31,261 (48,812) ---------- ---------Net cash inflow/(outflow) from operating activities 484,238 (7,917) ========== ========= 27. Analysis of cash flows for headings netted in the cash flow statement 2005 2004 £ £Returns on investment and servicing of financeInterest received 1,137 6,332Interest paid (86,799) (85,667) ---------- ---------Net cash outflow for returns on investments andservicing of finance (85,662) (79,335) ========== ========= Capital expenditurePayments to acquire tangible fixed assets (89,791) (234,080)Receipts from sales of tangible fixed assets 18,384 11,492 ---------- ---------Net cash outflow from capital expenditure (71,407) (222,588) ========== ========= Acquisitions and disposalsPurchase of joint venture 5,000 - ========== ========= FinancingRepayment of hire purchase and finance leases (2,397) (6,389)Repayment of loans (127,013) (645,534)Purchase of treasury shares (49,910) - ---------- ---------Net cash outflow for financing (179,320) (651,923) ========== ========= 28. Analysis of net (debt)/funds 1 January 2005 Cash Other 31 December Flow non-cash 2005 changes £ £ £ £Cash in hand and at bank 1,242,152 (302,354) - 939,798Bank overdraft (427,068) 284,946 - (142,122) --------- -------- -------- --------- 815,084 (17,408) - 797,676Hire purchase due within one - 2,397 (5,255) (2,858)yearHire purchase due after one - - (10,261) (10,261)yearLoans due within one year (123,274) 127,013 (140,434) (136,695)Loans due after one year (1,050,091) - 140,434 (909,657) --------- -------- -------- --------- (358,281) 112,002 (15,516) (261,795) ========= ======== ======== ========= 29. Reconciliation of net cash flow to movement in net (debt)/funds 2005 2004 £ £Decrease in cash in the year (17,408) (1,150,565)Cash to repurchase debt 129,410 651,923New hire purchase (15,516) - -------- ---------Movement in net debt in the year 96,486 (498,642)Opening net (debt)/funds (358,281) 140,361 -------- ---------Closing net debt (261,795) (358,281) ======== ========= This information is provided by RNS The company news service from the London Stock Exchange