Last checked at 15 Oct 2008 07:00
Plexus Holdings plc ('Plexus' or 'the Group')
Preliminary Results for the year to 30 June 2008
Plexus Holdings plc, the AIM quoted oil and gas engineering services business and owner of the proprietary POS-GRIP method of wellhead engineering announces its preliminary results for year ending 30 June 2008.
Results
| * | 145% increase in profit before tax to £1.9m (2007: £0.8m before £0.8m gain on investment disposal) |
| * | 29% increase in turnover to £13.3m (2007: £10.3m) |
| * | 104% increase in EBITDA (before IFRS 2 share based payment charges of £0.18m) to £3.8m (2007: £1.9m before IFRS 2 share based payment charges of £0.12m and £0.8m gain on investment disposal) |
| * | Basic earnings per share of 1.61p (2007: 1.39p) |
Highlights
| * | Continued strong growth of oil and gas engineering service business supplying proprietary POS- GRIP wellhead equipment |
| * | New customer rental contract wins for StatoilHydro ASA, CNR International (U.K.) Limited ("CNR"), Lundin Petroleum AB ("Lundin") and SPD Ltd |
| * | First Middle Eastern contract win with Dubai Petroleum Establishment in June 2008 |
| * | Strong progress made in the growing high pressure/high temperature (HP/HT) market including a second contract win with Shell for Shell Egypt in August 2008 |
| * | £1.7m contract win with ConocoPhillips for the supply of 15,000 psi HP/HT and 20,000 psi extreme high pressure high temperature (X-HP/HT) rental wellhead exploration equipment for wells being drilled in the Norwegian North Sea was announced in September 2008 |
| * | Successful installation of the first 20,000 psi X-HP/HT rental wellhead system for BG International Ltd |
| * | POS-GRIP technology moves into the subsea market with contract wins from AGR Petroleum on behalf of Silverstone Energy Ltd and Sterling Resources (U.K.) Ltd for its unique M2S (mudline to subsea) cross-over system |
| * | Exercise of option to acquire Plexus Deepwater Technologies Ltd ("PDT") from Grant Prideco, Inc which unites the POS-GRIP subsea IP rights |
| * | Plexus Malaysia actively marketing the POS-GRIP equipment and services in the region |
| * | Capital expenditure of £3.8m made during the year, of which £2.4m was in property, plant and equipment primarily reflecting growth in rental inventory |
| * | 25% increase in personnel to 74 as at the year end (2007: 59) |
Chief Executive Ben van Bilderbeek said:
"I am pleased that our second full year as an AIM company has delivered excellent results where we have achieved strong sales and profit growth. At the same time it is particularly important to note that we have continued to advance our strategic goals of raising the profile of our proprietary POS-GRIP wellhead equipment which has resulted in increasing interest and support from the global oil and gas industry, particularly in the higher pressure/higher temperature rental wellhead exploration arena. This success has enabled us to win business from a number of new customers including our first contract with a Middle Eastern operator and our second X-HP/HT contract, and has given us the platform to establish our first base of operation outside of the UK in Malaysia which allows us to target the Asian marketplace, and extend our geographic reach.
Our focus remains in rental wellhead equipment and as such we are looking to accelerate investment in our rental wellhead inventory to increase our capacity for servicing customer demand from around the world, and improve our equipment utilisation rates. At the same time as building our core business we will continue to invest in developing our proprietary POS-GRIP technology for applications outside of wellheads which has already enabled us to move into the subsea market. I am confident that these initiatives and the unique nature of our technology will encourage potential licencees and alliance partners in the long term to work with us not only in the exploration rental equipment arena but more significantly in the key production wellhead sales market to fully exploit our resources, and deliver significant value to shareholders."
For further information please visit www.posgrip.com or contact:
| Ben van Bilderbeek | Plexus Holdings PLC | Tel: 020 7589 8555 |
| Graham Stevens | Plexus Holdings PLC | Tel: 020 7589 8555 |
| Alexander Dewar | Brewin Dolphin Investment Banking | Tel:0845 213 2076 |
| Sandy Fraser | Brewin Dolphin Investment Banking | Tel:0845 213 2076 |
| Felicity Edwards | St Brides Media & Finance Ltd | Tel: 020 7236 1177 |
| Isabel Crossley | St Brides Media & Finance Ltd | Tel: 020 7236 1177 |
Summary of Results for the year ended 30 June 2008
| 2008 £'000 | 2007 Restated £'000 | |
| Turnover | 13,275 | 10,274 |
| EBITDA - before the effect of IFRS 2 | 3,810 | 1,869 |
| EBITDA - after the effect of IFRS 2 | 3,629 | 1,753 |
| Profit before taxation | 1,905 | 1,566 |
| Basic earnings per share (pence) | 1.61 | 1.39 |
Chairman's Statement
Business progress
I am pleased to report that the Group has had another strong year of growth and made significant progress in a number of key strategic areas including strengthening the blue chip client base, advancing technological developments, and continued broadening of geographical areas of operation. This has resulted in a 29% increase in turnover to £13.3m for the year to 30th June 2008, and a 104% increase in EBITDA to £3.8m, (before IFRS 2 share based payment charges of £0.18m), resulting in earnings per share of 1.61p.
Strategy
Plexus is a company built around the development and commercialisation of its proprietary POS-GRIP technology. Our core strategy remains to grow our share of the wellhead rental exploration market, and in the longer term the volume production wellhead market, whilst continuing to extend our range of POS- GRIP applications into new product areas. For this reason we are particularly pleased to have successfully tested and delivered during the year the world's first 20,000 psi X-HP/HT, through the BOP, adjustable surface wellhead system, which is currently being used by BG International Ltd in the North Sea. In addition to our rental activities we have built and tested our first subsea application for Silverstone Energy Ltd in the form of a cross-over wellhead system. This milestone incorporated our metal-to-metal POS-GRIP activated HG® seals which are integral to the performance, safety, and time saving advantages that we offer the industry when comparing our proprietary equipment to conventional systems. This further demonstrates the significant commercial opportunities that exist in the oil and gas industry for innovative and, we believe, superior technology led solutions.
Together with expanding our range of products and services, part of our strategy is to broaden our areas of operation to enable us to pursue sales opportunities further afield from our traditional North Sea base whilst at the same time continuing to raise our profile with major operators. This will leave us well placed to benefit from such developments as the availability of the large number of new Jack-up rigs scheduled for delivery over the next 4 years. As these new rig units are designed to be able to drill deeper and higher pressure wells, they are generally equipped with well control equipment for which POS- GRIP wellhead equipment is ideally suited.
Such strategic sales initiatives have resulted over the year in a number of new contract wins including those with StatoilHydro ASA, Lundin Petroleum AB, and Dubai Petroleum Establishment, and since the year end a second HP/HT contract with Shell for Shell Egypt, and our first 20,000 psi X-HP-HT contract win with ConocoPhillips for exploration wells to be drilled in the Norwegian North Sea. Contract wins of this nature where Plexus is becoming the supplier of choice are extremely important for raising our profile within the oil and gas industry.
A key part of this diversification strategy away from our traditional North Sea heartland includes the establishment of an entity in Malaysia called Plexus Ocean Systems (Malaysia) Sdn Bhd as our first base of operation outside of Aberdeen. This entity where Plexus owns 49% which would be licensed to supply POS-GRIP equipment is already targeting new customers in the region and we are confident that we will be able to generate new sales opportunities over the coming months.
To be able to fulfil these strategic initiatives it is essential that we have the necessary number of skilled personnel, inventory, and facility space, therefore ongoing investment will continue to be made in these key areas. This is extremely important as we need to continue to drive our organic growth as a means of ensuring our role in the industry and the part we play in meeting the increasing challenges in both exploring for and producing oil and gas in unconventional conditions is recognised by both operators and our peers. As we continue to pursue such a strategy, we believe we will be successful in time in persuading potential licensees and alliance partners to invest in helping us to accelerate the roll out of POS- GRIP technology across the wider industry, and particularly in the volume production wellhead market.
In recognition of the continuing growth and development of Plexus, and the increasing importance of all matters relating to "Quality, Health, Safety and Environment" it is also important to report on new initiatives during the year to ensure our ability to meet ever more stringent standards, which can be essential to the winning of contracts from contractors and operators. For these reasons the Plexus Excellence Programme was created and implemented to manage and monitor all aspects of our health and safety policies which will underpin our growth plans and ongoing acceptance by major international customers.
Staff
The Board is grateful to all our employees, many of whom are new to the Company, and would like to thank everyone for their dedication and hard work during a year that has achieved a number of milestones in terms of winning new customers and the successful development and testing of new POS- GRIP products.
Outlook
Our central belief that our patented proprietary POS-GRIP technology has an increasingly important role to play in the oil and gas wellhead industry, as well as being able to extend to a much broader range of products including connectors and valves, is being vindicated as Plexus continues to grow and gain recognition from major international operators around the world. This increasing recognition combined with the industry's increasing need to have access to innovative and groundbreaking technological solutions places Plexus in a strong position to become a significant participant in the oil services sector. This is particularly the case where major international operators have chosen to specify and deploy our equipment in preference to traditional alternatives which we believe have performance limitations, especially at high pressure levels where POS-GRIP excels. We therefore look forward to the future with confidence whilst being cognisant that we are operating in a sector where contracts have long lead times and can lead to some volatility in anticipated revenues.
Robert Adair
Non-Executive Chairman
14 October 2008
Chief Executive's Review
Plexus has continued to make excellent progress during its second full year of operation as an AIM company. These results reflect both the increasing awareness within the oil and gas industry of our proprietary POS-GRIP wellhead equipment and the returns deriving from our ongoing investment programme in people, technological development, and rental inventory.
We have also benefited from a growing exploration rental wellhead market and we anticipate that this demand will continue despite signs of an economic slowdown as the world continues to be dependant on oil and gas. The industry's need to pursue unconventional fields, particularly those which are HP/HT, and the unique safety and technical benefits that our technology provides for such activities places us in a strong position to be able to capitalise on these opportunities.
The progress made during the year has been driven and underpinned by a number of key contract wins and commercial developments of which some of the more notable were as follows:
| * | Successful installation of the first 20,000 psi X-HP/HT rental wellhead system for BG International Ltd. |
| * | POS-GRIP technology moved into the subsea market for the first time with contract wins from AGR Petroleum on behalf of Silverstone Energy Ltd and Sterling Resources (U.K.) Ltd for its unique M2S (mudline to subsea) cross-over wellhead system. This new equipment enables the conversion of pre- drilled wells to subsea production, and incorporates our metal-to-metal POS-GRIP activated HG seals. These seals are integral to the performance, safety, and time saving advantages that we believe we can demonstrate to the industry when comparing our proprietary equipment to conventional systems. |
| * | Exercise of option to acquire US based Plexus Deepwater Technologies Ltd (PDT) from Grant Prideco, Inc. This acquisition delivers to Plexus the 50% commercial interest over the POS- GRIP subsea technology intellectual property rights that Grant Prideco controlled at the time of admission to AIM in December 2005, and leaves Plexus with 100% ownership and full control. |
| * | Winning first contract with StatoilHydro ASA for the supply of HP/HT exploration rental wellhead equipment, mudline suspension equipment and service support for the Norwegian North Sea. |
| * | First Middle Eastern contract win with Dubai Petroleum Establishment in the Arabian Gulf which is a key milestone in the region and which it is hoped will generate additional opportunities in the future. |
| * | Extension of trading relationship with Shell leading to the contract win in August 2008 for the supply of HP/HT equipment to Shell Egypt in the Egyptian Eastern Mediterranean Sea, which is our second contract win in the Northern African region. |
| * | Post year end £1.7m contract win with ConocoPhillips for the supply of 15,000 psi HP/HT and 20,000 psi X-HP/HT rental wellhead exploration equipment contract for wells being drilled in the Norwegian North Sea. This is our second 20,000 psi X-HP/HT contract and further demonstrates our growing reputation in the expanding unconventional and more extreme drilling arena. |
Our focus during the year has been the pursuit of organic growth through a combination of developing and building on existing contracts and relationships, whilst vigorously promoting and championing POS-GRIP technology around the world to new customers and potential alliance partners. Such activity has successfully generated a number of new key contracts with world class operating companies in a variety of geographical locations, and this places us in an excellent position to capitalise on new business opportunities as they arise. At the same time the market for oil and gas services continues to grow and we are particularly encouraged by the fact that independent research predicts that the global Jack-up fleet will over the next four years increase by 52 rigs equipped with Blow Out Preventers ('BOP') that are designed in a way that is particularly suited to our HP/HT through the BOP adjustable method of engineering. We believe that this additional modern generation rig capacity will help us to continue to drive the growth of our HP/HT and X-HP/HT rental sales activities.
The success of our strategy to date and the increasing awareness and support for our proprietary technology from the operators, is evidenced by the make up of our year-on-year sales increase to £13.3m from £10.3m. Our HP/HT and X-HP/HT rental sales contributed £7.0m in the year equating to growth of 150% against £2.8m the prior year. This is extremely encouraging and could not have been achieved without further significant capital investment which totalled £2.4m for the rental fleet and tangible assets, as well as investment in people throughout the year which resulted in our headcount increasing by 25% to 74 as at the year end as compared to 59 at the same time last year.
In summary I am very pleased with this strong set of results and the progress we have continued to make during the year. It is important to emphasise that the underlying performance of our rental activities is to a degree masked by our continued investment in facilities, personnel, development and testing in support of new product development and additional applications for POS-GRIP. However over the longer term I believe that such investment and our ability to demonstrate that our proprietary technology is safer to use, easier to install, lower in cost to manufacture, and superior in performance, is key to making a breakthrough with potential licensees and alliance partners who in time will engage with us to fully exploit our capabilities on a global scale including in the key production wellhead sales market, and thereby deliver significant value to our shareholders.
Ben van Bilderbeek
Chief Executive
14 October 2008
Financial Review
Turnover
Turnover for the year was £13.3m, up 29% from £10.3m in the previous year reflecting strong growth during the year.
The rental business and related equipment and services accounted for over 85% of turnover as compared to over 56% last year. HP/HT and X-HP/HT again generated the largest year on year sales increase of nearly 150%. Turnover includes £1.5m of engineering and testing which reflects the increase in activity relating to the ongoing development of POS-GRIP technology for new applications including subsea equipment.
Margin
Gross margins have increased to 54.8% from 45.1% in the previous year as rental sales continued to increase as a percentage of total revenues and related economies of scale benefits flow through.
Overhead expenses
In line with sales and profit growth overhead expenses have increased so as to be able to provide the necessary infrastructure and skill base to support the growing number of customers around the world. This resulted in total overheads increasing to £5.2m from £3.9m in the previous year of which overhead staff costs increased to £2.8m from £2.0m reflecting the continuing need to increase our permanent headcount to support increased activity levels and more complex projects. Other items which increased significantly year on year were overseas base costs, travel, freight, warehouse consumables, and equipment hire costs as a result of the growing international profile of our customers and business activities.
EBITDA
The EBITDA for the year (before IFRS 2 share based payment charges of £0.18m) was £1.9m, up from £1.1m the previous year (before IFRS 2 share based payment charges of £0.12m and £0.8m gain on investment disposal). EBITDA margin for the year increased to 29.1% as compared to 18.3% last year. The Group's ongoing significant investment in people, infrastructure, and inventory has enabled Plexus to in particular grow rental sales and this has helped to deliver the strong year on year EBITDA growth due to the higher gross margins that are generated.
Profit before tax
Profit before tax of £1.9m compares to a profit last year of £0.8m (before the £0.8m gain on investment disposal). Depreciation and amortisation increased to £1.58m against £0.98m last year reflecting the increase in assets during the period. The profit before tax is stated after the charge for share based payments under reporting standard IFRS 2; the charge for the full year is £0.18m compared to £0.12m last year.
Tax
The Group UK Corporation Tax charge was significantly higher than the prior year as a result of the rise in trading profitability. This resulted in a tax charge of £0.62m for the year as compared to £0.45m last year.
EPS
The Group reports basic earnings per share of 1.61p compared to 1.39p last year (after adjusting for the effect of conversion to IFRS reporting).
Cash and Balance Sheet
The balance sheet reflects the growth in operations during the year with the net book value of tangible assets including items in the course of construction increasing to £7.3m from £6.6m last year. Receivables have increased to £6.9m as compared to £5.0m as a result of the increase in sales revenues. Net bank borrowings closed at £3.1m compared to a £1.8m last year reflecting the Group's ongoing investment in the expansion of the rental fleet and tangible assets totalling £2.4m, acquisition of PDT for £1.0m, increase in working capital requirements associated with longer payment cycles that can apply to international as opposed to local contracts, and ongoing investment in research and development and patent extensions. Net cash outflow for the year was £1.4m as compared to £4.7m last year. In recognition of the ongoing capital expenditure programme either completed or under construction together with the increase in working capital requirements the Group increased its bank facilities during the year to £4.0m from the previous level of £2.5m.
Intellectual property
The Group carries in its balance sheet goodwill and intellectual property rights of £7.4m including an additional £1.0m resulting from the acquisition of PDT during the year. The directors have considered whether there have been any indications of impairment and have concluded that there have been no such indications. The directors therefore consider the current carrying values to be appropriate. Indications of impairment are considered annually.
IFRS 2 (Share Based Payments)
IFRS 2 charges have been included in the accounts, in line with reporting standards. The "fair value" of share based payments has been computed independently by specialist consultants and is amortised evenly over the expected vesting period from the date of grant. The charge for the year was £0.18m which compares to £0.12m for last year.
International Financial Reporting Standards ("IFRS")
This is the first full year that Plexus has reported under International Financial Reporting Standards ("IFRS") and this years accounts are now as required IFRS compliant. The Annual Report is therefore longer as it contains a number of reconciliations between UK GAAP and IFRS. The accounts for the prior period have been restated under IFRS and these accounts were audited under UK GAAP. The adjustments between UK GAAP and IFRS are detailed in note 26 and are not considered material.
Graham Stevens
Finance Director
14 October 2008
Consolidated Income Statement
for the year ended 30 June 2008
| 2008 £'000 | 2007 Restated £'000 | |
| Revenue | 13,275 | 10,274 |
| Cost of sales | (6,003) | (5,640) |
| Gross profit | 7,272 | 4,634 |
| Administrative expenses | (5,167) | (3,862) |
| Operating profit | 2,105 | 772 |
| Other income | - | 789 |
| Finance income | 14 | 52 |
| Finance costs | (156) | (47) |
| Share of loss of associate | (58) | - |
| Profit before taxation | 1,905 | 1,566 |
| Income tax expense | (616) | (450) |
| Profit after taxation being profit for the | ||
| financial year | 1,289 | 1,116 |
| Earnings per share | ||
| Profit for the year attributable to Plexus Holdings shareholders | ||
| Basic | 1.61p | 1.39p |
| Diluted | 1.60p | 1.39p |
Consolidated Balance Sheet
at 30 June 2008
| 2008 £'000 | 2007 Restated £'000 | |
| Assets | ||
| Goodwill | 722 | 722 |
| Intangible assets | 6,661 | 5,611 |
| Property, plant and equipment | 7,329 | 6,549 |
| 14,712 | 12,882 | |
| Non-current assets | ||
| Inventories | 3,478 | 3,123 |
| Trade and other receivables | 6,907 | 4,976 |
| Cash at bank and in hand | 456 | 128 |
| Current assets | 10,841 | 8,227 |
| Total Assets | 25,553 | 21,109 |
| Equity and Liabilities | ||
| Called up share capital | 802 | 802 |
| Share premium account | 15,596 | 15,596 |
| Share based payments reserve | 360 | 179 |
| Retained earnings | 787 | (502) |
| Total equity | 17,545 | 16,075 |
| Liabilities | ||
| Deferred tax liabilities | 377 | 322 |
| Non-current liabilities | 377 | 322 |
| Trade and other payables | 3,521 | 2,707 |
| Current income tax liabilities | 510 | 104 |
| Borrowings | 3,600 | 1,901 |
| Current liabilities | 7,631 | 4,712 |
| Total liabilities | 8,008 | 5,034 |
| Total Equity and Liabilities | 25,553 | 21,109 |
These financial statements were approved and authorised for issue by the board of directors on 14 October 2008 and were signed on its behalf by:
| B van Bilderbeek | G Stevens |
| Director | Director |
Consolidated Statement of Changes in Equity
for the year ended 30 June 2008
| Group | |||||
| Called Up Share Capital £'000 | Share Premium Account £'000 | Share Based Payments Reserve £'000 | Retained Earnings £'000 | Total £'000 | |
| Balance as at 1 July 2006 as reported | |||||
| under UK GAAP | 802 | 15,596 | 63 | (1,585) | 14,876 |
| Changes in accounting policy arising from | |||||
| IFRS | - | - | - | (33) | (33) |
| Balance as at 1 July 2006 under IFRS | 802 | 15,596 | 63 | (1,618) | 14,843 |
| Profit for the year | - | - | - | 1,116 | 1,116 |
| Share based payments reserve charge | - | - | 116 | - | 116 |
| Balance as at 30 June 2007 | 802 | 15,596 | 179 | (502) | 16,075 |
| Profit for the year | - | - | - | 1,289 | 1,289 |
| Share based payments reserve charge | - | - | 181 | - | 181 |
| Balance as at 30 June 2008 | 802 | 15,596 | 360 | 787 | 17,545 |
Consolidated Cash Flow Statement
for the year ended 30 June 2008
| 2008 £'000 | 2007 Restated £'000 | |
| Cash flows from operating activities | ||
| Profit before taxation | 1,905 | 1,566 |
| Adjustments for: | ||
| Depreciation and amortisation | 1,581 | 981 |
| Loss/(profit) on disposal of plant, property and equipment | 84 | (2) |
| Profit on disposal of investment | - | (789) |
| Charge for share based payments | 181 | 116 |
| Investment income | (14) | (52) |
| Interest expense | 156 | 47 |
| Changes in working capital: | ||
| Increase in inventories | (355) | (1,885) |
| Increase in trade and other receivables | (1,920) | (2,326) |
| Increase in trade and other payables | 27 | 1,761 |
| Cash generated from operations | 1,645 | (583) |
| Income taxes paid | (155) | (24) |
| Net cash generated from operations | 1,490 | (607) |
| Cash flows from investing activities | ||
| Acquisition of subsidiary entity | (254) | - |
| Purchase of intangible assets | (356) | (237) |
| Purchase of plant, property and equipment | (2,360) | (4,856) |
| Proceeds of sale of plant, property and equipment | 258 | 28 |
| Proceeds of sale of investments | - | 989 |
| Net cash used in investing activities | (2,712) | (4,076) |
| Cash flows from financing activities | ||
| Interest paid | (152) | (41) |
| Interest received | 3 | 41 |
| Net cash used in financing activities | (149) | - |
| Net decrease in cash and cash equivalents | (1,371) | (4,683) |
| Cash and cash equivalents at 1 July 2007 | (1,773) | 2,910 |
| Cash and cash equivalents at 30 June 2008 | (3,144) | (1,773) |
Notes to the Consolidated Financial Statements
| 1. | Revenue | ||
| 2008 £'000 | 2007 £'000 | ||
| By geography | |||
| UK | 6,391 | 4,173 | |
| Europe | 3,235 | 1,459 | |
| Rest of World | 3,649 | 4,642 | |
| 13,275 | 10,274 | ||
| By type | |||
| Sale of goods | 1,960 | 4,173 | |
| Services | 11,315 | 1,459 | |
| Construction contract | - | 4,642 | |
| 13,275 | 10,274 |
| 2. | Segment reporting |
| The Group derives turnover from the sale of its POS-GRIP technology and associated products, the rental of wellheads utilising the POS-GRIP technology and service income principally derived in assisting with the commissioning and ongoing service requirements of our equipment. These income streams are all derived from the utilisation of the technology which the Group believes is its only segment. |
| 3. | Earnings per share | ||
| 2008 £'000 | 2007 Restated £'000 | ||
| Profit attributable to shareholders | 1,289 | 1,116 | |
| Number | Number | ||
| Weighted average number of shares in issue | 80,182,569 | 80,182,569 | |
| Dilution effects of share schemes | 409,284 | 258,510 | |
| Diluted weighted average number of shares in issue | 80,591,853 | 80,441,079 | |
| Basic earnings per share | 1.61p | 1.39p | |
| Diluted earnings per share | 1.60p | 1.39p |
| Basic earnings per share is calculated on the results attributable to ordinary shares divided by the weighted average number of shares in issue during the year. | |
| Diluted earnings per share calculations include additional shares to reflect the dilutive effect of employee share schemes and share option schemes. |
| 4. | Intangible fixed assets | ||||
| Intellectual Property £'000 | Patent and Other Development £'000 | Computer Software £'000 | Total £'000 | ||
| Cost | |||||
| As at 1 July 2006 | 5,403 | 478 | 55 | 5,936 | |
| Additions | - | 230 | 7 | 237 | |
| As at 1 July 2007 | 5,403 | 708 | 62 | 6,173 | |
| Additions | 1,037 | 344 | 12 | 1,393 | |
| As at 30 June 2008 | 6,440 | 1,052 | 74 | 7,566 | |
| Amortisation | |||||
| As at 1 July 2006 | 173 | 55 | 9 | 237 | |
| Charge for the year | 270 | 30 | 25 | 325 | |
| As at 1 July 2007 | 443 | 85 | 34 | 562 | |
| Charge for the year | 270 | 46 | 27 | 343 | |
| As at 30 June 2008 | 713 | 131 | 61 | 905 | |
| Net Book Value | |||||
| As at 30 June 2008 | 5,727 | 921 | 13 | 6,661 | |
| As at 30 June 2007 | 4,960 | 623 | 28 | 5,611 | |
| As at 30 June 2006 | 5,230 | 423 | 46 | 5,699 | |
| Patent and other development costs are internally generated. |
| 5. | Plant, property and equipment | ||||
| Equipment £'000 | Assetsunder Construction £'000 | Motor Vehicles £'000 | Total £'000 | ||
| Cost | |||||
| As at 1 July 2006 | 2,660 | 510 | 28 | 3,198 | |
| Additions | 315 | 4,541 | - | 4,856 | |
| Transfers | 3,481 | (3,481) | - | - | |
| Disposals | (56) | - | (1) | (57) | |
| As at 1 July 2007 | 6,400 | 1,570 | 27 | 7,997 | |
| Additions | 78 | 2,281 | 1 | 2,360 | |
| Transfers | 3,629 | (3,629) | - | - | |
| Disposals | (413) | - | (6) | (419) | |
| As at 30 June 2008 | 9,694 | 222 | 22 | 9,938 |
| Depreciation | |||||
| As at 1 July 2006 | 810 | - | 13 | 823 | |
| Charge for the year | 652 | - | 4 | 656 | |
| On disposals | (30) | - | (1) | (31) | |
| As at 1 July 2007 | 1,432 | - | 16 | 1,448 | |
| Charge for the year | 1,234 | - | 4 | 1,238 | |
| On disposals | (71) | - | (6) | (77) | |
| As at 30 June 2008 | 2,595 | - | 14 | 2,609 | |
| Net book value | |||||
| As at 30 June 2008 | 7,099 | 222 | 8 | 7,329 | |
| As at 30 June 2007 | 4,968 | 1,570 | 11 | 6,549 | |
| As at 30 June 2006 | 1,850 | 510 | 15 | 2,375 |
| 6. | Share Capital | ||
| 2008 £'000 | 2007 £'000 | ||
| Authorised: | |||
| Equity: 110,000,000 Ordinary shares of 1p each | 1,100 | 1,100 | |
| Allotted, called up and fully paid: | |||
| Equity: 80,182,569 Ordinary shares of 1p each | 802 | 802 |
| 7. | Reconciliation of net cash flow to movement in net debt | ||
| 2008 £'000 | 2007 £'000 | ||
| (Decrease)/increase in cash in the year | (1,371) | (4,683) | |
| Cash outflow from decrease in net debt | - | - | |
| Change in net debt resulting from cash flows | (1,371) | (4,683) | |
| Loan set against debtor balance | - | - | |
| Movement in net debt in year | (1,371) | (4,683) | |
| Net cash/(debt) at start of year | (1,773) | 2,910 | |
| Net cash outflow from operating activities | (3,144) | (1,773) |
| 8. | Analysis of net debt | |||
| At beginning of year £'000 | Cash flow £'000 | At end of year £'000 | ||
| Cash in hand and at bank | 128 | 328 | 456 | |
| Overdrafts | (1,901) | (1,699) | (3,600) | |
| Total | (1,773) | (1,371) | (3,144) | |
| 9. | Transition to IFRS | |||||
| 1 | Introduction | |||||
| The Financial Statements for the 12 months ended 30 June 2008 have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) for the first time. The comparative information in the financial statements has been restated to IFRS and a reconciliation of the differences disclosed. The disclosures required by IFRS 1 concerning the transition from UK Generally Accepted Accounting Practice (UK GAAP) to IFRS are set out below. Reconciliations from UK GAAP to IFRS of the Group's net assets at 30 June 2007 and net profit for the year ended 30 June 2007 are also included. The IFRS standards that principally affect adjustments between UK GAAP and IFRS are: IFRS 1 - First-Time Adoption of International Financial Reporting Standards IFRS 3 - Business Combinations IAS 19 - Employee Benefits IAS 38 - Intangible Assets IFRS 1, First-Time Adoption of IFRS, outlines how to apply IFRS for the first time. The Group's transition date is 1 July 2006, and the standard permits certain exemptions from the full requirements of IFRS at that date. | ||||||
| 2 | Exemptions | |||||
| The Group has taken the following exemptions or options available as at transition | ||||||
| (a) Business Combinations | ||||||
| The Group has taken the option not to restate business combinations that occurred prior to 1 July 2006 on an IFRS 3, Business Combinations basis. | ||||||
| 3 | Reconciliations to International Financial Reporting Standards | |||||
| Group reconciliation of equity as at 1 July 2006 | ||||||
| UK GAAP in IFRS format £000's | Effect of transition to IFRS £000's | IFRS £000's | ||||
| Assets | ||||||
| Goodwill | 722 | - | 722 | |||
| Intangible assets | 5,653 | 46 | 5,699 | |||
| Property, plant and equipment | 2,421 | (46) | 2,375 | |||
| Investments | 200 | - | 200 | |||
| Non-current assets | 8,996 | - | 8,996 | |||
| Inventories | 1,238 | - | 1,238 | |||
| Trade and other receivables | 2,640 | - | 2,640 | |||
| Cash and cash equivalents | 2,910 | - | 2,910 | |||
| Current assets | 6,788 | - | 6,788 | |||
| Total Assets | 15,784 | - | 15,784 | |||
| Equity and Liabilities | ||||||
| Capital and reserves attributable to equity holders of | ||||||
| the company | ||||||
| Called-up share capital | 802 | - | 802 | |||
| Share premium account | 15,596 | - | 15,596 | |||
| Share based payments reserve | 63 | - | 63 | |||
| Retained earnings | (1,585) | (33) | (1,618) | |||
| Total equity | 14,876 | (33) | 14,843 | |||
| Non-current liabilities | - | - | - | |||
| Trade and other payables | 908 | 33 | 941 | |||
| Current income tax liabilities | - | - | - | |||
| Borrowings | - | - | - | |||
| Current liabilities | 908 | 33 | 941 | |||
| Total liabilities | 908 | 33 | 941 | |||
| Total Equity and Liabilities | 15,784 | - | 15,784 | |||
| Group reconciliation of equity as at 1 July 2007 | ||||
| UK GAAP in IFRS format £000's | Effect of transition to IFRS £000's | IFRS £000's | ||
| Assets | ||||
| Goodwill | 681 | 41 | 722 | |
| Intangible assets | 5,583 | 28 | 5,611 | |
| Property, plant and equipment | 6,577 | (28) | 6,549 | |
| Non-current assets | 12,841 | 41 | 12,882 | |
| Inventories | 3,123 | - | 3,123 | |
| Trade and other receivables | 4,976 | - | 4,976 | |
| Cash and cash equivalents | 128 | - | 128 | |
| Current assets | 8,227 | - | 8,227 | |
| Total Assets | 21,068 | 41 | 21,109 | |
| Equity and Liabilities | ||||
| Capital and reserves attributable to equity holders of | ||||
| the company | ||||
| Called-up share capital | 802 | - | 802 | |
| Share premium account | 15,596 | - | 15,596 | |
| Share based payments reserve | 179 | - | 179 | |
| Retained earnings | (501) | (1) | (502) | |
| Total equity | 16,076 | (1) | 16,075 | |
| Deferred tax liabilities | 322 | - | 322 | |
| Non-current liabilities | 322 | - | 322 | |
| Trade and other payables | 2,665 | 42 | 2,707 | |
| Current income tax liabilities | 104 | - | 104 | |
| Borrowings | 1,901 | - | 1,901 | |
| Current liabilities | 4,670 | 42 | 4,712 | |
| Total liabilities | 4,992 | 42 | 5,034 | |
| Total Equity and Liabilities | 21,068 | 41 | 21,109 |
| Group reconciliation of income statement for the year ended 30 June 2007 |
| UK GAAP in IFRS format £000's | Effect of transition to IFRS £000's | IFRS £000's | ||
| Revenue | 10,274 | - | 10,274 | |
| Cost of sales | (5,640) | - | (5,640) | |
| Gross profit | 4,634 | - | 4,634 | |
| Administrative expenses | (3,894) | 32 | (3,862) | |
| Operating profit | 740 | 32 | 772 | |
| Other income | 789 | - | 789 | |
| Finance income | 52 | - | 52 | |
| Finance costs | (47) | - | (47) | |
| Profit before taxation | 1,534 | 32 | 1,566 | |
| Income tax expense | (450) | - | (450) | |
| Profit after taxation | 1,084 | 32 | 1,116 | |
| The following changes to accounting policies and presentation resulted from the transition to IFRS: | |||
| a | Intangible assets | ||
| IAS 38 - Intangible Assets requires that software costs which are not integral to the operation of the piece of machinery be classified as intangible assets. The costs and depreciation relating to expenditure on such software has been reclassified from Property, plant and equipment to intangible assets. A reclassification of £45,666 was made on transition to IFRS on 1 July 2006 and further reclassifications were made during the year to 30 June 2007 (£27,973). | |||
| b | Goodwill | ||
| Under UK GAAP the Group amortised goodwill over its useful economic life. IFRS 3 - Business Combinations requires that goodwill is not amortised but is subject to an annual impairment review instead. IFRS requires that an impairment test is carried out at transition date based on the conditions at that date. No impairment was identified at the date of transition and no adjustments to the carrying value of goodwill were made. Subsequent impairment tests performed in accordance with IAS 38 have similarly resulted in no impairment having been identified. The remeasurement adjustment made to the Group balance sheet reverses the amortisation of goodwill charged in the year from 1 July 2006 to 30 June 2007 £41,083. | |||
| c | Holiday pay accrual | ||
| IAS 19 - Employee Benefits requires that where an entity compensates employees for holiday, an accrual be recognised to the extent that accumulated untaken entitlement can be carried forward and taken or paid in a future period. Holiday pay accruals were not recognised by the Group under UK GAAP. The following accruals were made in accordance with IAS 19: | |||
| At 1 July 2006 | £32,791 | ||
| At 30 June 2007 | £41,711 | ||
The financial information above does not constitute the company's statutory accounts for the year ended 30 June 2008. The statutory financial statements for the year ended 30 June 2008 were approved by the Board on 14 October 2008. On the same date the company's auditors, Horwath Clark Whitehill LLP. issued an unqualified report on those financial statements. The auditors have not drawn attention to any matters without qualifying their report and have not made any statement under section 237(2) or (3) of the Companies Act 1985. A copy of the statutory accounts will be delivered to the Registrar of Companies in due course.
The Annual Report will be circulated to all shareholders and thereafter, copies will be available from the registered office of the Company, Plexus House, 1 Cromwell Place, London, SW7 2JE.