Parkmead Regulatory News (PMG)

19 Oct 2006 07:01

Parkmead Group (The) PLC19 October 2006 Thursday 19 October 2006 THE PARKMEAD GROUP PLC ("Parkmead" or the "Group") Preliminary results for the 12 months ended 30 June 2006 The Parkmead Group plc (PMG) today announces its unaudited preliminary resultsfor the year ended 30 June 2006. Financial highlights • Core investment and advisory revenues increased 143% from £1.352 million to £3.287 million • Corporate finance business now trading profitably • Restructuring plans completed with significant reduction in costs achieved • Acquisition of Quayside Corporate Services Limited proving cash flow positive and profitable • £10.0 million share placing in February 2006; the Company has no net debt • Operating loss on continuing operations (including restructuring costs) of £2.314 million (2005 £1.744 million) • Retained loss for the year of £4.742 million (2005: £0.356 million) includes a £2.671million charge for provisions against the value of the Group's portfolio investments • Loss per share £0.028p (2005: £0.004p) Commenting on the results, Colin Goodall, Chairman of The Parkmead Group plc,said: "In the early part of 2006 we announced our plans to fundamentally restructurethe Group. I am pleased to announce that we have substantially achieved ourgoals. We have reduced the Group's cost base such that our core CorporateFinance Advisory business is now trading profitably. Following the shareplacement undertaken in February of this year the Group is now in a net cashpositive position with funds available for investment and to grow the underlyingbusinesses. The acquisition of Quayside Corporate Services Limited, profitablesince acquisition, has been successfully integrated in to the Group and we areseeing strong deal flow to our Corporate Finance business. Subsequent to theyear end we announced the sale of Audio Visual Machines Limited, which hasfurther improved our cash position. We have reconstituted our Board to reflectthe Group's new strategic direction. I look forward to the continueddevelopment of the Group over the coming year. " -Ends- For further information: The Parkmead Group plc 020 7494 3080Niall Doran CEOGordon Ashworth, CFO Madano Partnership 0207 593 4000Mathew Moth/Toby Wilkinson THE PARKMEAD GROUP PLC CHAIRMAN'S STATEMENT Development of the Group During the second half of the year ended 30 June 2006 the Group implemented anumber of significant changes following a strategic review by the Board.During the first half of the year ended 30 June 2006 it became clear that theformer business model of the Group was not viable, in terms of bothprofitability and growth. In particular, the Group's cash resources were indecline and the Group's trading subsidiaries were not, and were not likely tobe, cash generative in the near term. The Board agreed to implement a number ofsignificant changes to address these issues: • to reduce the Group's cost base; • to seek additional sources of capital; • to seek an exit from the Group's portfolio investments and subsidiaries; • to seek acquisitions which would enhance the Group's deal flow and also be cash generative; and • to change the core focus of the Group from being technology specific to multi sector An integral part of these changes was to re-constitute the Board to reflect theGroup's new strategic direction. Kenneth Olisa, Roger Jeynes, Martin Cooper,Rupert Cook, Richard Fifield, John Forrest and Geoffrey Shingles stood down fromthe Board during the year. Subsequent to the year end Melvyn Morris also stooddown. I should like to take this opportunity to thank them for theircontribution to the Group. During the year Niall Doran was appointed ChiefExecutive Officer, David Mills was appointed Executive Director following theacquisition of Quayside Corporate Services Limited and Gordon Ashworth wasappointed as Chief Financial Officer. Additionally the Group made a number ofNon Executive appointments. These were John Leggate, Brian Wilson, and myselfas Non Executive Chairman. On 13 January 2006, Ian Taylor changed from being anExecutive Director to a Non Executive Director. Subsequent to the year endThomas Cross was also appointed as a Non Executive Director. On 16 May 2006, the Group also changed its named from Interregnum plc to TheParkmead Group plc. I am pleased to announce that the Group has substantially completed the changesarising out of the strategic review: • the Company's core operating costs have been substantially reduced and by way of example our annualised payroll costs have reduced from £1.351 million to £0.689 million. A further £0.377 million loss was incurred in 2006 by our US operation prior to its closure during the year; • in early February 2006 the Group raised £10.0 million before expenses through a placing with institutional investors; • our efforts to realise value through the sale of our portfolio and subsidiary companies have proven more time consuming than envisaged. However, we continue to keep this position under review and on 6 October 2006 the Group announced the sale of Audio Visual Machines; • additionally, the Group acquired the entire share capital of Quayside Corporate Services Limited ("QCS"). QCS provides business turnaround consulting services and is highly complimentary to the Group's corporate finance advisory business. The QCS business is cash generative and is performing in line with expectations; and • we have moved away from an exclusive focus on the technology sector and are now engaging in corporate finance advisory activities across the telecom, defence, transport and energy sectors. Results and Dividends In the interim report for the six months ended 31 December 2005 an operatingloss of £1.593 million was reported. The retained loss for the same periodreported was £3.347 million. Following the completion of our restructuringplans and the downward revaluation of our portfolio holdings, the overalloperating loss for the year amounted to £2.305 million (after restructuringcosts) and the retained loss for the year amounted to £4.742 million. The Boardis not recommending the payment of a dividend (2005: £nil). Investment and Advisory Corporate Finance Business The Group's corporate finance team operates out of The Parkmead Group plc. Our2006 revenues grew 143% to £3.287 million (2005: £1.352 million) due to somesignificant corporate finance deals and were further enhanced following theacquisition of QCS. The loss for the year reflects the completion of ourrestructuring and cost reduction exercise which was implemented in the earlypart of 2006 and the results of our assessment of our portfolio companiesdescribed below. Our corporate finance activity is now well placed to produceprofitable and sustainable growth. Broadening the team's sector focus hasdelivered an increased deal flow with the result that performance in the firstquarter of the financial year ending 30 June 2007 has been profitable. We areparticularly pleased to see opportunities flowing into the team out of QCS,which has also traded profitably since acquisition. Current assignments coverthe energy, aviation and the consulting sectors. The Group's operations in theUSA were heavily loss making during the year and, accordingly, the Group closedthis operation prior to the year end. Portfolio Investments Performance of the Group's portfolio of technology investments has been mixed.The Group values its investments according to the International Private Equityand Venture Capital Valuation guidelines ("IPEVC"). Applying the IPEVCguidelines as at 30 June 2006 produced a valuation for the portfolio of £3.059million (2005: £5.648 million). Following the appointment of administrators to Keycrypt, Netinfo, Webscreen andNanomagnetics the Group recognised additional provisions during the year toprovide fully against the carrying values of these investments. The Group'sholdings in Open Text and Adaptive were disposed of during the year and werefully provided for prior to their disposal. During the year the Group alsoprovided fully against the carrying value of its investments in Blue Arc, EliteStrategies, Futureroute, Knowledge=Power, Oilcats, Raidtec, and Speed Trap.Following the valuation exercise undertaken in accordance with the IPEVC rules,the Group has assessed the value of its investments in Respond, Red M andMetapraxis resulting in a downward valuation. The additional provisions resultedin a charge to the profit and loss account of £2.671million and the reversal ofprior year revaluations. As previously stated the Group continues to pursue disposal strategies withregards to its non core subsidiaries and investments. Following the change of strategy and direction noted above the Group made itsfirst investment as principal by way of the acquisition of 4.7% of ThruvisionLimited (Thruvision) for a consideration of £1.052 million. Thruvision hasdeveloped proprietary non intrusive imaging technologies used in the detectionof explosives. Thruvision's technologies are of significant interest to thesecurity and defence industries and we believe that this investment will berealised through a trade sale in the near to mid term. Subsidiaries The Group's other two trading subsidiaries delivered much improved performanceduring the year. Software Development, Support and Marketing Yospace Technologies Limited ("Yospace") develops, installs and maintainsmessage management systems for mobile phone operators and has also developeduser generated content solutions for the mobile phone industry and other contentproviders. Yospace's turnover increased to £1.885 million (2005: £1.235million) due to new contract wins across Europe, and, for the six months ended30 June 2006, Yospace was profitable at the operating level. The Group is satisfied with the trading performance of this business. Audio Visual Systems Audio Visual Machines Limited ("AVM") designs, installs and services audiovisual systems. Turnover in AVM increased from £1.892 million (for the fivemonths from acquisition in January 2005 to 30 June 2005) to £7.944 million forthe year ended 30 June 2006. Of this £6.052 million increase, £2.171 millionarose on the acquisition of the Video Meeting Company Limited made by AVM duringthe year. AVM traded profitably throughout the year. As previously stated, the Group has sought to realise value from these tradingsubsidiaries and in this regard the Group announced the sale of AVM for aconsideration of £1.275 million before expenses on 6 October 2006. Accordinglythe results of AVM have been classified under discontinued operations in theprofit and loss account. Key Performance Indicators The Board monitors performance in its investment and advisory businesses throughthe reporting of monthly profit and loss accounts, cash flow forecasts, andbalance sheet reporting. Additionally key performance indicators are set,against which the Board can assess performance and prospects for the businesses.With regard to QCS, the Board monitors each assignment undertaken againstbudgeted profit and gross profit margin. With regard to the corporate financebusiness, revenue is analysed between recurring revenue streams and successfees. The baseline target is to cover fixed costs with recurring revenues. The Board continues to monitor the performance of its other investments to seekthe maximum returns on exit. Principal Risks and Uncertainties The principal trading risks of the Group's corporate finance business are dealflow and the Group's ability to recruit and retain experienced corporate financeexecutives. With regard to deal flow the acquisition of QCS has improved theGroup's access to advisory, merger and acquisition opportunities significantlythrough its established network of banking and intermediary relationships.Recruitment and retention of experienced corporate finance executives remainschallenging. However, the Board believes that the Group is well placed to createinnovative and attractive packages for suitable staff. The Group's investment business is also exposed to any downturn in performanceof the underlying businesses in which it holds an interest. The Board regularlyevaluates the financial position of its investment portfolio. Outlook This has been a year of significant change for the Group. Following theplacement undertaken in February 2006 we have raised sufficient working capitalto develop the Group and we have reduced the Company's debt. We have refocusedour corporate finance business and this division is now trading profitably. QCShas traded profitably since acquisition. Importantly, it is also proving highlyeffective in creating deal flow for our corporate finance team. Corporateactivity in our business sectors remains strong and the Board believes that theGroup is well placed to benefit from this strength. Furthermore the Boardbelieves that by widening the Group's sector focus additional advisoryopportunities will arise and this has been borne out by trading in the firstquarter of the current financial year. The acquisition of QCS, whose primaryfocus is on turnaround opportunities arising out of over indebted businesses,effectively mitigates the Group against a general business downturn. We willcontinue to seek value through exiting from our portfolio investments and noncore subsidiaries. The Directors are satisfied with the position of thecompanies within the Group as at the year ended 30 June 2006. The Group is nowwell positioned to grow a profitable and growing business. Colin Goodall 19 October 2006. ....................."our business is, fundamentally, in better shape. We haverealigned our cost base with our revenues, our acquisition of QCS is provinghighly complimentary across the wider Group, we have increased our financialresources and we have eliminated our indebtedness in the Company. We are nowwell placed to build a profitable and growing business"............ Niall Doran Chief Executive 19 October 2006 THE PARKMEAD GROUP PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 JUNE 2006 (UNAUDITED) Continuing Operations Discontinued Existing Acquisitions Operations Total Total 2006 2006 2006 2006 2005 Notes £ £ £ £ £ Turnover 3 4,551,940 487,575 7,966,872 13,006,387 7,981,615 Cost of sales - (316,625) (4,672,914) (4,989,539) (2,291,818) Gross profit 4,551,940 170,950 3,293,958 8,016,848 5,689,797 Administrative expenses (7,095,771) (47,296) (3,284,615) (10,427,682) (7,351,725) Other operating income 106,054 - - 106,054 108,198 Operating (loss)/profit (2,437,777) 123,654 9,343 (2,304,780) (1,553,730) Profit on sale of investments - 4,434Exceptional profit on deemed 4 363,715 -disposalRelease of prior year provision - 1,271,819against investments Amounts written off investments 4 (2,670,624) (98,716)Net interest payable (1,553) (58,687) Loss on ordinary activities before taxation 3 (4,613,242) (434,880) Taxation (41,873) 30,300 Loss on ordinary activitiesafter taxation (4,655,115) (404,580) Minority interest - equity (86,587) 49,028 Loss for the financial year 7 (4,741,702) (355,552) Loss per 5p ordinary share- basic and diluted 6 (0.028) (0.0039) THE PARKMEAD GROUP PLC GROUP NOTE OF HISTORICAL COST PROFITS AND LOSSES FOR THE YEAR ENDED 30 JUNE 2006 (UNAUDITED) 2006 2005 £ £ Loss on ordinary activities before taxation (4,613,242) (434,880)Write-down of previous temporary diminution in value of fixed asset investments (306,464)charged against revaluation reserve Historical cost loss on ordinary activities before taxation (4,919,706) (434,880) Historical cost loss for year retained after taxation and minority interest (5,048,166) (355,552) GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 30 JUNE 2006 (UNAUDITED) 2006 2005 £ £Loss for the financial year attributable to members of the parent company (4,741,702) (355,552)Unrealised surplus on revaluation of fixed asset investments - 953,305Write-down of previous revaluation of fixed asset investments (1,095,754) (256,896)Temporary diminution in value of fixed asset investments - (360,290)Currency translation of foreign currency investments 9,772 - Total recognised losses relating to the year (5,827,684) (19,433) THE PARKMEAD GROUP PLC CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2006 (UNAUDITED) 2006 2005 £ £ £ £FIXED ASSETS Intangible assets 8,176,776 863,324 Tangible assets 598,355 617,484 Investments 3,059,365 5,648,003 11,834,496 7,128,811 CURRENT ASSETSStock 252,971 160,637Debtors 6,697,391 2,038,681Cash at bank and in hand 6,207,315 886,456 13,157,677 3,085,774 CREDITORSAmounts falling due withinone year (5,187,657) (3,296,519) NET CURRENT ASSETS /(LIABILITIES) 7,970,020 (210,745) TOTAL ASSETS LESS CURRENT LIABILITIES 19,804,516 6,918,066 CREDITORS Amounts falling due after more thanone year (694,982) (825,274) PROVISION FOR LIABILITIESAND CHARGES (108,816) (3,944) NET ASSETS 19,000,718 6,088,848 CAPITAL AND RESERVESCalled up share capital 18,417,089 4,621,263Share premium account - 19,430,496Revaluation reserve - 789,290Merger reserve (952,109) (2,406,655)Profit and loss account 1,198,507 (16,159,905) EQUITY SHAREHOLDERS' FUNDS 7 18,663,487 6,274,489MINORITY INTERESTS 337,231 (185,641) CAPITAL EMPLOYED 19,000,718 6,088,848 THE PARKMEAD GROUP PLC CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2006 (UNAUDITED) 2006 2005 £ £ Net cash flow from operating activities (3,697,293) (1,086,852) Returns on investments andservicing of finance (1,553) 235,543 Taxation 83,483 96,724 Capital expenditure and financial investment (1,221,727) (862,582) Acquisitions and disposals (406,776) (471,714) Cash outflow before financing (5,243,866) (2,088,881) Financing 10,584,419 (110,814) Increase/(decrease) in cash 5,340,553 (2,199,695) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS 2006 2005 £ £ Increase/ (decrease) in cash in the year 5,340,553 (2,199,695) Decrease in debt and lease financing 1,632,262 110,814 Finance leases acquired with subsidiaries (9,132) (162,743) Loan stock issued on acquisition of subsidiary - (300,000) Other non-cash changes - new finance leases (12,690) - Movement in net funds/ (debt) 6,950,993 (2,551,624) Net (debt)/funds at 1 July (1,598,757) 952,867 Net funds/ (debt) at 30 June 5,352,236 (1,598,757) THE PARKMEAD GROUP PLC NOTES TO THE PRELIMINARY RESULTS YEAR ENDED 30 JUNE 2006 1 PRELIMINARY ANNOUNCEMENT The preliminary results for the year ended 30 June 2006 are unaudited. Thefinancial information contained in this announcement does not constitute theGroup's audited statutory financial statements for the year ended 30 June 2006within the meaning of Section 240 of the Companies Act 1985. The financial information for the period from incorporation to 30 June 2005 hasbeen extracted from the Group's statutory financial statements for that periodwhich have been delivered to the Registrar of Companies. The report of theauditors on those financial statements was unqualified and did not contain anystatements under either Section 237(2) (accounting records or returnsinadequate or accounts not agreeing with records and returns) or 237(3)(failure to obtain necessary information and explanations) of the Companies' Act1985. The financial information contained in this announcement has beenprepared under accounting policies set out in Group financial statements for theperiod ended 30 June 2005, except where noted below in the basis of preparation. As at the date of this announcement, the auditors have not reported on theGroup's financial statements for the year ended 30 June 2006, nor have suchfinancial statements been delivered to the Registrar of Companies. Thefinancial statements for the year ended 30 June 2006 will be distributed toshareholders prior to, and filed with the Registrar of Companies following theAnnual General Meeting. 2 ACCOUNTING POLICIES Basis of preparation The financial statements are prepared under the historical cost conventionmodified to include the revaluation of fixed asset investments and in accordancewith the Companies Act 1985 and applicable accounting standards in the UnitedKingdom, except with regard to the specific provisions of the Act relating tothe revaluation of fixed asset investments that constitute associatedundertakings as explained in fixed asset investments below. Changes in accounting policy The following accounting standards, which were issued during the year, have beenadopted by the Group with no significant impact on these financial statements,including the comparatives: FRS 17 'Retirement Benefits', FRS 21' Events afterthe balance sheet date', FRS 22 'Earnings per Share', FRS 25 'FinancialInstruments: disclosure and presentation' and FRS 28' Corresponding amounts'. Going concern The Group's balance sheet has net funds of £5.352 million which includespositive cash balances of £6.207 million. Following the restructuring plansannounced in February 2006, and their subsequent implementation, the Group'scost base has been reduced significantly. A cash flow forecast has beenprepared for the next twelve months which shows that the Group will operatecomfortably within its available cash resources. Accordingly, the directorscontinue to adopt the going concern basis in the preparation of these accounts. Fixed asset investments Fixed asset investments, comprising equity shares, and loans are stated at costor valuation. In 2005, the Group applied the 'True and Fair override' principlewith regard to a departure from the Companies Act 1985, as permitted by FRS 9for companies within the investment industry. This override allows associatedundertakings to be recorded at fair value rather than to be equity accounted.The principle has been applied as the investments are held for their marketablevalue rather than as a media through which the Group carries out its business. Certain investment holdings were diluted in the period such that no associatedundertakings were held at the year ended 30 June 2006. The Group has applied theAlternative Accounting Rules to record its fixed asset investments at marketvalue as permitted by the Companies Act 1985. 3 SEGMENTAL ANALYSIS a) Business Segment AnalysisThe group is organised into three business segments: Investment and advisory, software development, support andmarketing and design, supply and installation of audio visual systems. Loss on ordinary activities before taxation Turnover and minority interest Net assets 2006 2005 2006 2005 2006 2005 £ £ £ £ £ £Continuing operations:Investment and advisory 3,286,875 1,351,612 (4,346,717) (145,163) 18,697,961 6,767,762 Less: inter segmental (132,000) (325,000) - - - -salesSoftware development, 1,884,640 1,234,632 (245,846) (478,698) (963,426) (777,494)Support and marketing 5,039,515 2,261,244 (4,592,563) (623,861) 17,734,535 5,990,268 Discontinued OperationsInvestment and advisory 22,497 - (376,550) - (2,975) -Mobile and wireless - 3,828,634 - 63,117 - -ConsultancyDesign, supply and 7,944,375 1,891,737 355,871 125,864 1,269,158 98,580install of audio visualsystems 13,006,387 7,981,615 (4,613,242) (434,880) 19,000,718 6,088,848 The segmental analysis of turnover, loss before tax and net assets for theinvestment and advisory business includes £487,575, £128,925 and £140,325 forthe year ended 30 June 2006 in respect of Quayside Corporate Services Limitedwhich was acquired during the year. b) Geographical Segment Analysis All turnover originated in the UK. i) Turnover by destination is as follows: 2006 2005 £ £ UK 10,342,438 7,342,289 Other European countries 952,594 71,525 USA and Canada 1,697,303 444,651 Other 14,052 123,150 13,006,387 7,981,615 2006 2005 ii) Loss on ordinary activities before taxation £ £ UK (4,236,692) (434,880) USA and Canada (376,550) - (4,613,242) (434,880) 3 SEGMENTAL ANALYSIS (CONTINUED) 2006 2005 iii) Net assets £ £ UK 19,003,693 6,088,848 USA and Canada (2,975) - 19,000,718 6,088,848 The segmental analysis of turnover, loss before tax and net assets for theUnited Kingdom includes £487,575, £128,925, and £140,325 for the year ended 30June 2006 in respect of Quayside Corporate Services Limited which was acquiredduring the year. The segmental analysis of turnover, profit before tax and net assets for theUnited Kingdom includes £7,944,375 (2005: £5,720,371), £355,871 (2005: loss(£133,531)) and £1,269,158 (2005: £228,076) at 30 June 2006 in respect of AudioVisual Machines Limited and its subsidiaries which were discontinued during theyear. The comparative figures for the year ended 30 June 2005 also include thediscontinued activities of Cellular Design Services Limited, a former subsidiaryundertaking of the Group, which was deconsolidated in that year. The segmental analysis of turnover, loss before tax and net assets for the USAand Canada includes £22,676, £376,650 and £2,175 in respect of US operationswhich were discontinued during the year. The analysis of operating profit/ (loss) between continuing and discontinuedoperations is set out below: 2006 2006 2006 2006 2005 2005 2005 Continuing operations Discontinued Total Continued Discontinued TotalTotal Existing Acquisitions £ £ £ £ £ £ Turnover 4,551,940 487,575 7,966,872 13,006,387 2,261,244 5,720,371 7,981,615Cost of sales - (316,625) (4,672,914) (4,989,539) (2,291,818) (2,291,818) Gross profit 4,551,940 170,950 3,293,958 8,016,848 2,261,244 3,428,553 5,689,797Administrative (7,095,771) (47,296) (3,284,615) (10,427,682) (4,113,257) (3,238,468) (7,351,725)expenses Other 106,054 - - 106,054 108,198 - 108,198operatingincome Operating (2,437,777) 123,654 9,343 (2,304,780) (1,743,815) 190,085 (1,553,730)profit/(loss) 4 EXCEPTIONAL PROFIT ON DEEMED DISPOSAL Audio Visual Machines Limited ("AVM"), a subsidiary of the Group, acquired theentire share capital of the Video Meeting Company Limited on 30 September 2005for a consideration of £800,000 satisfied by way of shares in Audio VisualMachines Limited. The issue of shares by AVM to the previous owners of VMCresulted in a reduction in the Group's holding in AVM from 77% to 54%. Inaccordance with FRS 2, the Group has recognised an exceptional profit of£363,715 in the profit and loss account following the reduction of the Group'sinterest in its subsidiary. Amounts Written off Investments In accordance with the Group's accounting policy, the Group has assessed thefair value of its fixed asset investments at the balance sheet date. Theassessment has resulted in a write-off of £2,670,624 (2005: £98,716) to theprofit and loss account. 5 ACQUISITIONS AND DISPOSALS On 28 February 2006, The Group acquired the entire share capital of QuaysideCorporate Services Limited for a consideration of 90,909,091 shares in TheParkmead Group plc plus a cash payment of an amount equal to the net asset valueof Quayside Corporate Services Limited at the date of acquisition being£1,856,835, giving rise to goodwill of £6,073,962. On 23 September 2005 AVM acquired 100% of the Video Meeting Company Limited fora consideration, including costs, of £816,627 satisfied by the issue of3,067,488 Ordinary B shares of £0.01 p each in AVM. The assets acquired havebeen included in the Group's balance sheet at their fair value as at the date ofacquisition and has given rise to goodwill of £1,428,047. On 16 February 2006, the Group acquired stock of £21,663 and certain contractsof DDI Lizard Limited for a consideration of £264,000. Acquisition costs of£4,000 were incurred and goodwill of £238,337 arose on this transaction. On 29 September 2006 The Parkmead Group plc entered into an agreement to sellits entire shareholding in AVM for a consideration of £1,275,000 beforeexpenses. 6 LOSS PER SHARE The basic loss per share has been calculated by dividing the loss attributableto equity shareholders funds by the weighted average number of shares in issueduring the year. The loss and weighted average number of shares used in the calculation of theloss per share are set out below: 2006 2005Basic loss per shareLoss attributable to ordinary shareholders (£) (4,741,702) (355,552)Weighted average number of shares - number 171,332,649 92,425,254 Loss per 5p ordinary share from continuing operations - basic and (0.028p) (0.0038p)diluted Diluted Loss per share Due to the loss in the current and prior year there is no further dilution ofthe loss per share as a result of the share options in issue. The loss and weighted average number of shares used to calculate the loss pershare based on continuing and discontinued operations respectively are set outbelow: 2006 2005Basic loss per share from continuing operationsLoss attributable to ordinary shareholders (£) (4,741,702) (355,552)Pre-tax losses from discontinued operations (£) (20,679) (188,981)Tax relating to discontinued operations (£) (141,211) 30,766Losses from continuing operations (£) (4,579,812) (197,377) Weighted average number of shares - number 171,332,649 92,425,254 Loss per 5p ordinary share from continuing operations - basic and (0.027p) (0.0021p)diluted 2006 2005 Basic loss per share from discontinued operationsPre-tax losses from discontinued operations (£) (20,679) (188,981)Tax relating to discontinued operations (£) (141,211) 30,766Losses from discontinued operations (£) (161,890) (158,215) Weighted average number of shares - number 171,332,649 92,425,254 Loss per 5p ordinary share from discontinued operations- basic and (0.0009p) (0.0017p)diluted 7 RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS 2006 2005 Shareholders funds Shareholders funds £ £ At 1 July 6,274,489 6,293,922Shares issued - placing 10,000,000 - - EBT and on exercise of options 2,679,181 - - On acquisition of QCS 6,000,001 - Transaction costs (462,500) - Revaluation upwards - 953,305 Temporary diminutions in value of investments - (360,290) Write down of previous revalued investments (1,095,754) (256,896) Currency translation adjustment 9,772 - Loss for the year (4,741,702) (355,352) As at 30 June 18,663,487 6,274,489 8 NOTES TO THE CASH FLOW STATEMENT (a) Reconciliation of operating loss to net cash outflow from operating activities 2006 2005 £ £ Operating loss (2,304,780) (1,553,730)Depreciation 178,770 218,074Amortisation of intangible assets 426,894 178,408(Increase) / Decrease in stocks (22,566) 115,800Increase in debtors (2,973,149) (448,215)Increase in creditors 897,553 398,867Increase in other provisions 100,000 3,944 Net cash outflow from operating activities (3,697,278) (1,086,852) b) Analysis of cash flows for headings netted in the cash flow statement 2006 2005 £ £Returns on investments and servicing of financeInterest received 300,353 421,154Interest paid (301,392) (185,257)Interest element of finance lease rental payments (514) (354) Net cash (outflow) / inflow from returns on investmentsand servicing of finance (1,553) 235,543 Capital expenditure and financial investmentPayments to acquire tangible fixed assets (95,222) (139,616)Payments to acquire fixed asset investments (1,270,505) (733,716)Receipts from sale of tangible fixed assets 3,372Receipts from sale of fixed assets investments 144,000 7,378 Net cash outflow from capital expenditureand financial investment (1,221,727) (862,582) Acquisitions and disposalsPurchase of subsidiary (916,596) (232,091)Deconsolidation of subsidiary (58,575)Cash /(Overdraft) acquired with subsidiary 509,820 (181,048) Net cash outflow from acquisitions (406,776) (471,714) FinancingIssue of ordinary share capital 12,679,181 -Less placement expenses (462,500) -Capital element of finance lease rental payments (2,544) (11,063)Decrease in short term borrowings (31,139) (395,563)(Decrease)/ increase in long term borrowings (1,598,579) 295,812 Net cash inflow /(outflow) from financing 10,584,419 (110,814) c) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT At At 1 July 2005 Cash flow Acquisitions Other 30 June 2006 non-cash changes £ £ £ £ £Cash 886,456 4,811,039 509,820 6,207,315 Overdraft (227,005) 19,694 (207,311) Short term loans (82,934) 31,139 (51,795)Finance lease obligations - 2,544 (9,132) (12,690) (19,278)Long term loans (675,274) 248,579 - (426,695)Loan stock (1,500,000) 1,350,000 (150,000) (1,598,757) 6,462,995 500,688 (12,690) 5,352,236 This information is provided by RNS The company news service from the London Stock Exchange