Primorus Inv. Regulatory News (PRIM)

28 Sep 2007 07:06

CSS Stellar PLC28 September 2007 CSS Stellar plc ("CSS" or "the Group") Interim Results for the six months ended 30 June 2007 CSS Stellar plc, the entertainment and sports management and marketing group,today announces its interim results for the six months ended 30 June 2007. Highlights: • Operating profit adjusted for one off write off and restructuring costs of £0.4 million (2006: £0.8 million) • Turnover on continuing operations of £14.4 million (2006: £14.5 million) • Loss per share of 3.28p (2006: earnings of 0.88p) Commenting on the results David Buchler, Chairman, said: "The Company has now emerged from a difficult period. Our underlying businessesoperate profitably and provide a sound base for future growth. Following myappointment as Chairman in August a full strategic review is under way todevelop the group from its present position. The Board is determined that allour businesses are operated in a way that will deliver maximum benefit to allShareholders." For further information please contact:CSS StellarDavid Buchler, Chairman Tel: 020 7647 9903 Bell PottingerStephen Benzikie/Andrew Benbow Tel: 020 7861 3232 CHAIRMAN'S STATEMENT This is my first opportunity to report to Shareholders since becoming Chairmanon 16 August 2007. During the six months to 30 June 2007 your Group achieved anadjusted operating profit of £360,000 (2006: adjusted operating profit of£789,000). This was before making a write off of £853,000 in connection with adiscontinued business and one off restructuring and abortive disposal costs of£611,000. As a result the Group incurred an operating loss of £1.1 million(2006: operating profit of £699,000). The Group operates Talent Management businesses in Europe and USA in theEntertainment and Sports sectors and Marketing businesses in USA. These arereviewed in more detail below. Talent management In the six months to 30 June 2007 turnover was £7.6 million (2006: £6.8 million)and operating profit was £298,000 (2006: £359,000). The decrease in operatingprofit was principally caused by an increase in agent employment costs. Entertainment Our principal operating subsidiary is The Peters Fraser and Dunlop GroupLimited, one of the UK's oldest and largest talent management agencies withoffices in London and New York. PFD clients Tom Stoppard and David Grindley both won Tony awards at the 61stceremony in June 2007, including a record 7 awards for Tom, whose trilogy "TheCoast of Utopia" won Best Play. Several PFD clients were winners at thePrimetime Emmy Awards, including Ricky Gervais for Outstanding Lead Actor in aComedy Series for Extras, and Philip Martin, for Outstanding Directing for aMiniseries, Movie or Dramatic Special. In April, Anthony Horowitz's novel "Nightrise" went straight to Number One inthe Children's Bestseller List. Sophie McKenzie won the Older Readers categoryof The Red House Children's Book Award with her thriller "Girl, Missing" and wasat this year's Hay Festival. In Film, "Atonement", starring Keira Knightley andJames McAvoy has been released to rave reviews and "Amazing Grace", written bySteven Knight and directed by Michael Apted, was released to great box officesuccess and critical acclaim. Michael Parkinson and Anne Robinson, both clientsof CSS Presenters, continue to be highly successful in their respective spheresof television. Sport Our clients continue to achieve success round the world. In May, DarioFranchitti won the prestigious Indy 500, and combined this success with outrightchampionship victory in the Indy Racing League. Allan McNish retained theAmerican Le Mans Series championship driving a diesel-powered Audi, and AJAllmendinger continued to advance his career in his rookie season in Nascar. Weremain confident that we will bring other drivers into this series and are wellpositioned to capitalise on the commercial opportunities available. In MotoGP, Andrea Dovizioso continued to achieve success in the 250 series andas the leading Honda-backed junior driver. In addition, we are also expecting anumber of deals to be concluded in the second half of 2007 which will lead toincreased representation in Nascar. Of our other clients, round-the-world yachtsmen Alex Thomson renewed hisheadline Hugo Boss sponsorship and is one of the favourites for the forthcomingBarcelona World Race in 2007. In rowing, as part of the GB Coxless Four, AndyHodge continues to win World Cup races. Within golf, Gonzalo Fernandez-Castano became the 2007 Italian Open Champion andhas built on the success achieved in 2006. Oliver Wilson has achieved continuedsuccess, including reaching the play-off in the Johnnie Walker Championship anda second place finish in the Deutsche Bank Championship, ranking him 26th on theEuropean Tour order of merit. Events In the six months to 30 June 2007 turnover in our Events company Icon DisplayLimited was £4.2 million (2006: £4.7 million) and operating profit was £63,000(2006: £720,000). The profits achieved in the first half of 2006 included thepositive impact of the 2006 FIFA World Cup. 2007 does not have a sporting eventof similar world wide significance. The main highlight of the first six months of 2007 has been the UEFA Eurotopevent contract, which covers the European Under 21 Championships in 2007 and2009, the Women's Championships in 2009 and Euro 2008. In addition to the mainevent, we are providing branding services for all supporting workshop and launchoccasions, including the Euro 2008 Final Draw, taking place in Lucerne thisDecember. Our other event contracts continued successfully with the first half of the yearcontaining the UEFA Cup and Champions League Finals, 888.com World SnookerChampionship, BMW PGA and Irish Open Golf Championships and the start of a verybusy season of cricket in the UK. In the Middle East we once again serviced the Commercial Bank Qatar Masters, theunique Doha Wheels and Heels event and were awarded the contract to brand theannouncement of Abu Dhabi's successful Formula 1 campaign. Marketing Our marketing division consists of two operations in New York and Minneapolis.In the six months to 30 June 2007 turnover was £2.5 million (2006: £3.0 million)and operating profit was £264,000 (2006: £163,000). As referred to earlier in mystatement we wrote off an amount of £853,000 previously expected to be receivedin respect of our former business in Canada resulting in a loss of £589,000. GEM New York is a promotional marketing business working with a range of largecorporate clients including General Electric, NBC and UBS. GEM Minneapolis is acreative design and photography business servicing clients who include 3M, BestBuy and Fingerhut. Central Costs During the six months to 30 June 2007 the Company incurred significant one offexceptional costs of £611,000 (2006: £90,000). These were caused by professionalfees incurred due to the actions of a former shareholder, a termination paymentto a previous Director and lease costs arising from the relocation of the HeadOffice function. Recurring central costs were £266,000 (2006: £330,000). General During the period under review the Group's net debt increased from £1.9 millionto £3.1 million principally as a consequence of the exceptional items referredto above. Shareholders funds decreased from £20.8 million to £19.6 millionprincipally as a consequence of the exceptional costs and write off previouslyreferred to. Board of Directors Our thanks go to Sean Kelly, who resigned as Chief Executive in July, and Ishould also like to thank Peter Owen and Simon Rhodes for their contribution tothe Group. They are both retiring from the Board today and we are welcomingCaroline Michel as an executive Director following her appointment as ChiefExecutive Officer of PFD. Outlook The Group has been through a period of change and disruption in the last yearwhich has inevitably impacted adversely on performance. My first task onassuming the position of Chairman has been to make clear the Board's strategy inrespect of our major subsidiary PFD. During the first half of 2006 the Board wasapproached by certain employees of PFD with a view to commencing negotiationsfor a Management Buy Out. Discussions continued during 2006 resulting in variousindicative offers being made during the first six months of 2007. None of these offers was at a level that in any way reflected the true value ofPFD and as a consequence your Board at no time accepted any of the proposals putto it. On my appointment as Chairman your Board confirmed its rejection of anyMBO proposals and I communicated this to the management of PFD. I want to reassure Shareholders about the financial implications of employeesleaving PFD. The speculation that this will cause a reduction in profits eitherthis year or next year is inaccurate. A substantial proportion of PFD's incomestream is contractually protected for the foreseeable future. Our aim is to growthe PFD business and to achieve this I announced the appointment of CarolineMichel, formerly the Chief Executive Officer of the William Morris Group in UK,as Chief Executive Officer two weeks ago. She has now taken up her role and Ibelieve that PFD is better placed to face the challenges of the future than ithas ever been. While I am pleased that all the Group's activities were profitable in the firsthalf of 2007 and are expected to continue to be profitable in the second half of2007 your Board has begun a full review of all operations in order to maximiseshareholder returns. At this time I should also like to thank all our hardworking employees for their efforts. Your Company has gone through a difficult period recently but I am confidentthat its underlying businesses provide a sound base for future growth and mycolleagues and I are determined that all our businesses are operated to ensurethe maximum benefit to all Shareholders. David Buchler Chairman28 September 2007 Independent Review report to CSS Stellar plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2007 which comprise the consolidated interim incomestatement, the consolidated interim balance sheet, the consolidated interim cashflow statement, the consolidated interim statement of recognised income andexpense and the related notes. We have read the other information contained inthe interim report which comprises only the Chairman's Statement and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the company, in accordance with guidance containedin APB Bulletin 1999/4 "Review of Interim Financial Information". Our reviewwork has been undertaken so that we might state to the company those matters weare required to state to them in a review report and for no other purpose. Tothe fullest extent permitted by law, we do not accept or assume responsibilityto anyone other than the company for our review work, for this report, or forthe conclusion we have formed. Directors' responsibilities The interim report including the financial information contained therein is theresponsibility of, and has been approved by, the directors. The directors areresponsible for preparing the interim report. As disclosed in note 2, the next annual financial statements of the group willbe prepared in accordance with International Financial Reporting Standards asadopted by the European Union. This interim report has been prepared inaccordance with the accounting policies set out in note 3 which are based on therecognition and measurement principles of IFRS in issue as adopted by theEuropean Union (EU) and are effective at 31 December 2007 or expected to beadopted and effective at 31 December 2007, the group's first annual reportingdate at which the group are required to use IFRS accounting standards adopted bythe EU. The accounting policies are consistent with those that the directors intend touse in the next annual financial statements. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4"Review of Interim Financial Information" issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of making enquiriesof management and applying analytical procedures to the financial informationand underlying financial data and, based thereon, assessing whether theaccounting policies and presentation have been consistently applied unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance withInternational Standards on Auditing (UK and Ireland) and therefore provides alower level of assurance than an audit. Accordingly, we do not express an auditopinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. GRANT THORNTON UK LLPCHARTERED ACCOUNTANTS London 28 September 2007 The maintenance and integrity of CSS Stellar plc's website is the responsibilityof the directors: the interim review does not involve consideration of thesematters and, accordingly, the company's reporting accountants accept noresponsibility for any changes that may have occurred to the interim reportsince it was initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination ofthe interim report differ from legislation in other jurisdictions. Consolidated interim income statement 6 months 6 months to Year to 31 to 30 June 30 June 2006 December 2006 2007 Unaudited Unaudited Unaudited Note £'000 £'000 £'000Continuing operations Revenue 14,378 14,476 31,644Cost of sales (6,853) (4,543) (11,011) ----------------------------------- Gross profit 7,525 9,933 20,633Abortive disposal costs 26 90 -Write off of irrecoverable debt 853 - -Restructuring costs 585 - -Other administrative costs 7,165 9,144 19,154 ----------------------------------- Total administrative costs 8,629 9,234 19,154 ----------------------------------- Operating (loss)/profit (1,104) 699 1,479 Finance income 75 55 141Finance expense (228) (166) (285) ----------------------------------- (Loss)/profit before tax (1,257) 588 1,335Income tax credit/(expense) 115 (292) (469) ----------------------------------- (Loss)/profit for the period (1,142) 296 866 =================================== Attributable to: Equity holders of the parent (949) 254 729Minority interest (193) 42 137 ----------------------------------- (1,142) 296 866 =================================== (Loss)/earnings per share: Basic (loss)/earnings per share 4 (3.28) 0.88 2.52 =================================== Diluted (loss)/earnings per share (3.28) 0.87 2.47 =================================== Consolidated interim balance sheet 30 June 30 June 31 December 2007 2006 2006 Unaudited Unaudited Unaudited Note £'000 £'000 £'000ASSETSNon-current assetsProperty, plant and equipment 1,900 2,017 1,899Goodwill 19,396 19,396 19,397Available for sale financial assets 41 41 41Deferred tax asset 336 42 65 ---------------------------------- 21,673 21,496 21,402 ---------------------------------- Current assetsInventories 294 644 187Trade and other receivables 7,332 7,395 6,635Cash and cash equivalents 1,233 1,373 1,649 ---------------------------------- 8,859 9,412 8,471 ---------------------------------- Total assets 30,532 30,908 29,873 ================================== LIABILITIESCurrent liabilitiesTrade and other payables 6,027 6,884 5,073Short-term borrowings 3,085 2,676 2,109Current portion of long-term 533 533 533borrowingsCurrent tax payable 587 535 487 --------------------------------- 10,232 10,628 8,202 --------------------------------- Non-current liabilitiesLong-term borrowings 733 953 894 --------------------------------- Total liabilities 10,965 11,581 9,096 --------------------------------- Net assets 19,567 19,327 20,777 ================================= EQUITYEquity attributable to equity holdersof the parentShare capital 14,487 14,487 14,487Share premium account 28,158 28,158 28,158Revaluation reserve 448 465 456Translation reserve 80 (73) 80Profit and loss account (23,855) (23,349) (22,846) ---------------------------------- 19,318 19,688 20,335Minority interest 249 (361) 442 ---------------------------------- Total equity 19,567 19,327 20,777 ================================== Consolidated interim statement of recognised income and expense 6 months to 6 months Year to 31 30 June to 30 June December 2007 2006 2006 Unaudited Unaudited Unaudited Note £'000 £'000 £'000Exchange differences on translation of foreign operations 80 (73) 80 ------------------------------- Net income recognised directly in equity 80 (73) 80(Loss)/profit for the period (1,142) 296 866 ------------------------------- Total recognised income and expense for the period (1,062) 223 946 =============================== Attributable to: Equity holders of the parent (869) 181 809Minority interest (193) 42 137 ------------------------------- (1,062) 223 946 =============================== Consolidated interim cash flow statement 6 months to 6 months to Year to 31 30 June 2007 30 June December 2006 2006 Unaudited Unaudited Unaudited Note £'000 £'000 £'000Cash flows from operating activities (Loss)/profit after taxation (1,142) 296 866Adjustments for:Depreciation 279 194 469Net interest expense 153 111 144Taxation (credit)/expense recognised in profit and loss (115) 292 633 Increase in trade and other receivables (503) (2,595) (2,020)(Increase)/decrease in inventories (107) (364) 93Increase in trade payables 623 1,803 859 ------------------------------- Cash generated from operations (812) (263) 1,044Interest paid (228) (171) (285)Income taxes paid - - (45) -------------------------------- Net cash (used in)/from operating activities (1,040) (434) 714 -------------------------------- Cash flows from investing activities Purchase of property, plant and equipment (289) (178) (334)Proceeds from sale of property, plant and equipment 9 10 9Interest received 75 60 141 ------------------------------- Net cash used in investing activities (205) (108) (184) ------------------------------- Cash flows from financing activities Repayment of long-term borrowings (183) (177) (362)Payment of finance lease liabilities - - (44)New finance leases 36 - - ------------------------------- Net cash used in financing activities (147) (177) (406) ------------------------------- Net (decrease)/increase in cash and cash equivalents (1,392) (719) 124Cash and cash equivalents at beginning of period (460) (584) (584) -------------------------------- Cash and cash equivalents at end of period (1,852) (1,303) (460) ================================ Notes to the consolidated interim financial statements 1 Publications of non-statutory accounts The financial information set out in this interim report does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985. Thefigures from the year ended 31 December 2006 have been extracted from thestatutory financial statements which have been filed with the Registrar ofCompanies, and which were prepared under UK GAAP. The auditors' report wasunqualified and did not contain a statement under Section 237(2) of theCompanies Act 1985. 2 Basis of preparation These consolidated interim financial statements are for the six months ended30 June 2007. They do not include all of the information required for fullannual financial statements, and should be read in conjunction with theconsolidated financial statements of the Group for the year ended 31 December2006. These consolidated interim financial statements have been prepared under thehistorical cost convention, except for revaluation of certain properties andfinancial instruments. The Directors have prepared cash flow forecasts which show that the Group willbe able to meet its financial obligations for at least twelve months from thedate of these financial statements. The Company's bankers have indicatedcontinuing support during this period while the Directors carry out theirstrategic review. Accordingly, the Directors consider it appropriate to preparethe financial statements on a going concern basis. These consolidated interim financial statements (the interim financialstatements) have been prepared in accordance with the accounting policies setout in note 2 which are based on the recognition and measurement principles ofIFRS in issue as adopted by the European Union (EU) and are effective at31 December 2007 or are expected to be adopted and effective at31 December 2007, our first annual reporting date at which we are required touse IFRS accounting standards adopted by the EU. CSS Stellar plc's consolidated interim financial statements were prepared inaccordance with United Kingdom Accounting Standards (United Kingdom GenerallyAccepted Accounting Practice) until 31 December 2006. The date of transition toIFRS was 1 January 2006. The comparative figures in respect of 2006 have beenrestated to reflect changes in accounting policies as a result of adoption ofIFRS. The disclosures required by IFRS 1 concerning the transition from UK GAAPto IFRS are given in the reconciliation schedules, presented and explained innote 5. The accounting policies have been applied consistently throughout the Group forthe purposes of preparation of these consolidated interim financial statements. 3 Principal accounting policies Basis of Consolidation The interim financial statements consolidate those of the company and all of itssubsidiary undertakings drawn up to 30 June 2007. Subsidiaries are entities overwhich the group has the power to control the financial and operating policies soas to obtain benefits from its activities. The group obtains and exercisescontrol through voting rights. Unrealised gains on transactions between the group and its subsidiaries areeliminated. Unrealised losses are also eliminated unless the transactionprovides evidence of an impairment of the asset transferred. Amounts reported inthe financial statements of subsidiaries have been adjusted where necessary toensure consistency with the accounting policies adopted by the group. Acquisitions of subsidiaries are dealt with by the purchase method. The purchasemethod involves the recognition at fair value of all identifiable assets andliabilities, including contingent liabilities of the subsidiary, at theacquisition date, regardless of whether or not they were recorded in thefinancial statements of the subsidiary prior to acquisition. On initialrecognition, the assets and liabilities of the subsidiary are included in theconsolidated balance sheet at their fair values, which are also used as thebases for subsequent measurement in accordance with the group accountingpolicies. Goodwill is stated after separating out identifiable intangibleassets. Goodwill represents the excess of acquisition cost over the fair valueof the group's share of the identifiable net assets of the acquired subsidiaryat the date of acquisition. Business combinations completed prior to date of transition to IFRS The group has elected not to apply IFRS 3 Business Combinations retrospectivelyto business combinations prior to the date of transition. Accordingly the classification of the combination remains unchanged from thatused under UK GAAP. Assets and liabilities are recognised at date of transitionif they would be recognised under IFRS, and are measured using their UK GAAPcarrying amount immediately post-acquisition as deemed cost under IFRS, unlessIFRS requires fair value measurement. Deferred tax and minority interest areadjusted for the impact of any consequential adjustments after taking advantageof the transitional provisions. Goodwill Goodwill representing the excess of the cost of acquisition over the fair valueof the group's share of the identifiable net assets acquired is capitalised andreviewed annually for impairment. Goodwill is carried at cost less accumulatedimpairment losses. Goodwill written off to reserves prior to date of transition to IFRS remains inreserves. There is no re-instatement of goodwill that was amortised prior totransition to IFRS. Goodwill previously written off to reserves is not writtenback to profit or loss on subsequent disposal. Revenue Revenue is measured by reference to the fair value of consideration received orreceivable by the group for goods supplied and services provided, excluding VATand trade discounts. Revenue is recognised upon the performance of services ortransfer of risk to the customer. Talent ManagementTurnover represents commission recognised on an agent basis when contractuallydue from clients. Marketing Turnover represents fees and advertising sales, recognised when the services areperformed in accordance with contractual arrangements for client representationand sales invoiced to third parties. Events Turnover represents gross fees and sales of materials. Turnover is recognised onperformance of services in accordance with contractual arrangements, and salesof materials are recognised on delivery. Turnover excludes value added tax and similar sales related taxes. Dividends Dividends are recognised when the shareholders right to receive payment isestablished. Property, plant and equipment Property, plant and equipment is stated at cost or valuation, net ofdepreciation and any provision for impairment. Assets carried at valuation The only class of assets that is carried at fair value is freehold property.Revaluations are performed with sufficient frequency to ensure that the carryingamount does not differ materially from that which be determined using fair valueat each reporting date. Any revaluation surplus is credited to "revaluationreserve" in equity, unless the carrying amount has previously suffered arevaluation decrease or impairment loss. To the extent that any decrease haspreviously been recognised in the income statement, a revaluation increase isrecognised in the income statement, with the remaining part of the increasecharged to equity. Downward revaluations are recognised upon appraisal orimpairment testing, with the decrease being charged against any revaluationsurplus in equity relating to this asset and any remaining decrease recognisedin the income statement. Revalued assets carried at cost after first adoption of IFRS On first adoption of IFRS the carrying value of land and freehold buildings thathad previously been revalued is shown as deemed cost, and not subsequentlyrevalued. The revaluation surplus that had been previously recognised isretained in the revaluation reserve and transferred to distributable reserves onimpairment, depreciation or disposal of the relevant properties as above. Depreciation Depreciation is calculated to write down the cost less estimated residual valueof all property, plant and equipment other than freehold land by equal annualinstalments over their estimated useful economic lives. The rates generallyapplicable are: Freehold properties 3.3% per annumLeasehold properties Period of leaseMotor vehicles 25% per annumEvent equipment 20% - 33% per annumOffice equipment 33% per annumFurniture and fittings 15 - 25% per annumLeasehold improvements Period of lease Material residual value estimates are updated as required, but at leastannually, whether or not the asset is revalued. Leased assets In accordance with IAS 17, the economic ownership of a leased asset istransferred to the lessee if the lessee bears substantially all the risks andrewards related to the ownership of the leased asset. The related asset isrecognised at the time of inception of the lease at the fair value of the leasedasset or, if lower, the present value of the minimum lease payments plusincidental payments, if any, to be borne by the lessee. A corresponding amount is recognised as a finance leasing liability. The interest element of leasing payments represents a constant proportion of thecapital balance outstanding and is charged to the income statement over theperiod of the lease. All other leases are regarded as operating leases and the payments made underthem are charged to the income statement on a straight line basis over the leaseterm. Lease incentives are spread over the term of the lease. Inventories Inventories are stated at the lower of cost and net realisable value. Costs ofordinarily interchangeable items are assigned using the first in, first out costformula. Cost includes materials and direct labour. Taxation Current tax is the tax currently payable based on taxable profit for the year. Deferred income taxes are calculated using the liability method on temporarydifferences. Deferred tax is generally provided on the difference between thecarrying amounts of assets and liabilities and their tax bases. However,deferred tax is not provided on the initial recognition of goodwill, nor on theinitial recognition of an asset or liability unless the related transaction is abusiness combination or affects tax or accounting profit. Deferred tax ontemporary differences associated with shares in subsidiaries and joint venturesis not provided if reversal of these temporary differences can be controlled bythe group and it is probable that reversal will not occur in the foreseeablefuture. In addition, tax losses available to be carried forward as well as otherincome tax credits to the group are assessed for recognition as deferred taxassets. Deferred tax liabilities are provided in full, with no discounting. Deferred taxassets are recognised to the extent that it is probable that the underlyingdeductible temporary differences will be able to be offset against futuretaxable income. Current and deferred tax assets and liabilities are calculatedat tax rates that are expected to apply to their respective period ofrealisation, provided they are enacted or substantively enacted at the balancesheet date. Changes in deferred tax assets or liabilities are recognised as a component oftax expense in the income statement, except where they relate to items that arecharged or credited directly to equity in which case the related deferred tax isalso charged or credited directly to equity. Financial assets Financial assets are divided into the following categories: loans andreceivables and available-for-sale financial assets. Financial assets areassigned to the different categories by management on initial recognition,depending on the purpose for which they were acquired. Provision against trade receivables is made when there is objective evidencethat the group will not be able to collect all amounts due to it in accordancewith the original terms of those receivables. The amount of the write-down isdetermined as the difference between the asset's carrying amount and the presentvalue of estimated future cash flows. Available-for-sale financial assets include non-derivative financial assets thatare either designated as such or do not qualify for inclusion in any of theother categories of financial assets. All financial assets within this categoryare measured subsequently at fair value, with changes in value recognised inequity, through the statement of recognised income and expense. Gains and lossesarising from investments classified as available-for-sale are recognised in theincome statement when they are sold or when the investment is impaired. In the case of impairment of available-for-sale assets, any loss previouslyrecognised in equity is transferred to the income statement. Impairment lossesrecognised in the income statement on equity instruments are not reversedthrough the income statement. Impairment losses recognised previously on debtsecurities are reversed through the income statement when the increase can berelated objectively to an event occurring after the impairment loss wasrecognised in the income statement. An assessment for impairment is undertaken at least at each balance sheet date. A financial asset is derecognised only where the contractual rights to the cashflows from the asset expire or the financial asset is transferred and thattransfer qualifies for derecognition. A financial asset is transferred if thecontractual rights to receive the cash flows of the asset have been transferredor the group retains the contractual rights to receive the cash flows of theasset but assumes a contractual obligation to pay the cash flows to one or morerecipients. A financial asset that is transferred qualifies for derecognition ifthe group transfers substantially all the risks and rewards of ownership of theasset, or if the group neither retains nor transfers substantially all the risksand rewards of ownership but does transfer control of that asset. Financial liabilities Financial liabilities are obligations to pay cash or other financial assets andare recognised when the group becomes a party to the contractual provisions ofthe instrument. Financial liabilities categorised as at fair value throughprofit or loss are recorded initially at fair value, all transaction costs arerecognised immediately in the income statement. All other financial liabilitiesare recorded initially at fair value, net of direct issue costs. All financial liabilities are recorded at amortised cost using the effectiveinterest method, with interest-related charges recognised as an expense infinance cost in the income statement. Finance charges, including premiumspayable on settlement or redemption and direct issue costs, are charged to theincome statement on an accruals basis using the effective interest method andare added to the carrying amount of the instrument to the extent that they arenot settled in the period in which they arise. A financial liability isderecognised only when the obligation is extinguished, that is, when theobligation is discharged or cancelled or expires. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, togetherwith other short-term, highly liquid investments that are readily convertibleinto known amounts of cash and which are subject to an insignificant risk ofchanges in value. Dividends Dividend distributions payable to equity shareholders are included in "othershort term financial liabilities" when the dividends are approved in generalmeeting prior to the balance sheet date. Equity Equity comprises the following: • "Share capital" represents the nominal value of equity shares. • "Share premium" represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue. • "Other reserve" represents equity-settled share-based employee remuneration until such share options are exercised. • "Translation reserve" represents the differences arising from translation of investments in overseas subsidiaries. • "Revaluation reserve" represents gains and losses due to the revaluation of certain financial assets and property, plant and equipment. • "Profit and loss reserve" represents retained profits. Foreign currencies Transactions in foreign currencies are translated at the exchange rate ruling atthe date of the transaction. Monetary assets and liabilities in foreigncurrencies are translated at the rates of exchange ruling at the balance sheetdate. Non-monetary items that are measured at historical cost in a foreigncurrency are translated at the exchange rate at the date of the transaction.Non-monetary items that are measured at fair value in a foreign currency aretranslated using the exchange rates at the date when the fair value wasdetermined. Any exchange differences arising on the settlement of monetary itemsor on translating monetary items at rates different from those at which theywere initially recorded are recognised in the profit or loss in the period inwhich they arise. Exchange differences on non-monetary items are recognised inthe statement of recognised income and expenses to the extent that they relateto a gain or loss on that non-monetary item taken to the statement of recognisedincome and expenses, otherwise such gains and losses are recognised in theincome statement. The assets and liabilities in the financial statements of foreign subsidiariesand related goodwill are translated at the rate of exchange ruling at thebalance sheet date. Income and expenses are translated at the actual rate. Theexchange differences arising from the retranslation of the opening netinvestment in subsidiaries are taken directly to the Translation reserve inequity. On disposal of a foreign operation the cumulative translationdifferences are transferred to the income statement as part of the gain or losson disposal. The group has taken advantage of the exemption in IFRS 1 and has deemedcumulative translation differences for all foreign operations to be nil at thedate of transition to IFRS. The gain or loss on disposal of these operationsexcludes translation differences that arose before the date of transition toIFRS and includes later translation differences. Share-based payment - Equity settled share-based payment All share-based payment arrangements granted after 7 November 2002 that had notvested prior to 1 January 2006 are recognised in the financial statements. Allequity-settled share-based payments are ultimately recognised as an expense inthe income statement with a corresponding credit to "other reserve". If vesting periods or other non-market vesting conditions apply, the expense isallocated over the vesting period, based on the best available estimate of thenumber of share options expected to vest. Estimates are subsequently revised ifthere is any indication that the number of share options expected to vestdiffers from previous estimates. Any cumulative adjustment prior to vesting isrecognised in the current period. No adjustment is made to any expenserecognised in prior periods if share options ultimately exercised are differentto that estimated on vesting. Upon exercise of share options the proceeds received net of attributabletransaction costs are credited to share capital, and where appropriate sharepremium. 4 Earnings per share The calculation of the basic earnings per share is based on the earningsattributable to ordinary shareholders divided by the weighted average number ofshares in issue during the year. The calculation of diluted earnings per share is based on the basic earnings pershare, adjusted to allow for the issue of shares and the post tax effect ofdividends and/or interest, on the assumed conversion of all dilutive options andother dilutive potential ordinary shares. Reconciliations of the earnings and weighted average number of shares used areset out below. 6 months to 30 June 2007 (unaudited) Earnings Weighted Per share average amount number of shares £'000 PenceContinuing operations Loss after tax (949) ------ Earnings attributable to ordinary shareholders (949)Weighted average number of shares (used 28,976,581for basic earnings per share)Dilutive effect of options (297,181) --------- Diluted weighted average number of shares (used for diluted earnings pershare) 28,679,400Basic earnings per share (3.28) ====== Diluted earnings per share (3.28) ======= 6 months to 30 June 2006 (unaudited) Earnings Weighted Per share average amount number of shares £'000 PenceContinuing operations Profit after tax 254 ------ Earnings attributable to ordinary shareholders 254Weighted average number of shares (used for basic earnings per share) 28,976,581Dilutive effect of options 58,450 ---------- Diluted weighted average number of shares (used for diluted earnings pershare) 29,035,031Basic earnings per share 0.88 ==== Diluted earnings per share 0.87 ==== Year to 31 December 2006 (unaudited) Earnings Weighted Per share average no. amount shares £'000 PenceContinuing operations Profit after tax 729 ---- Earnings attributable to ordinary shareholders 729Weighted average number of shares (used for basic earnings per share) 28,976,581Dilutive effect of options 487,619 ---------- Diluted weighted average number of shares (used for diluted earnings pershare) 29,464,200Basic earnings per share 2.52 ===== Diluted earnings per share 2.47 ===== 5 Transition to IFRS As stated in Note 2, these are the Group's first consolidated interim financialstatements for part of the period covered by the first IFRS annual consolidatedfinancial statements prepared in accordance with IFRS. An explanation of how thetransition from UK GAAP to IFRS has affected the Group's financial position,financial performance and cash flows is set out in the following tables andnotes that accompany the tables. Goodwill Under UK GAAP, the Group's policy was to amortise goodwill over periods from 5to 20 years. Under IFRS 3 'Business Combinations' there is no amortisation ofgoodwill although goodwill is subject to annual impairment review. As announcedin the Chairman's Statement the new Board is carrying out a full review of allthe Group's operations. As part of this review the Board will be undertaking, inaccordance with International Accounting Standard 36 "Impairment of assets", areview of the carrying value of the Group's operating entities which will beconducted during the second half of this year. Translation differences on foreign operations Cumulative translation differences on foreign operations are deemed to be nil at1 January 2006, in accordance with IFRS 1 First Time Adoption of InternationalFinancial Reporting Standards. Any gains and losses recognised in theconsolidated income statement on subsequent disposal of foreign operations willexclude translation differences arising prior to the transition date. Foreign Exchange Rates The Group has elected not to apply IAS 21 The Effects of Changes in ForeignExchange Rates retrospectively to goodwill and fair value adjustments arising onbusiness combinations before the Group's date of transition to IFRS. Suchgoodwill and fair value adjustments are not treated as foreign currency assetsand so are not retranslated at each reporting date Reconciliation of equity at 1 January 2006 (unaudited) Notes UK GAAP a b c d e IFRS £ £ £ £ £ £ £Non-current assetsProperty, plant and equipment 2,043 - - - - - 2,043Goodwill 19,397 - - - - - 19,397Available for sale financial assets 41 - - - - - 41Deferred tax assets - - - 205 - (164) 41 Current assetsInventories 280 - - - - - 280Trade and other receivables 5,102 - - (205) - - 4,897Cash and cash equivalents 954 - - - - - 954 Current liabilitiesTrade and other payables 4,487 - - - - - 4,487Short-term borrowings 1,538 - - - - - 1,538Current portion of long-term borrowings 533 - - - - - 533Current tax payable 193 - - - - - 193 Non-currentliabilitiesLong-term borrowings 1,275 - - - - - 1,275 --------------------------------------------------------------- Net assets 19,791 - - - - (164) 19,627 =============================================================== EquityShare capital 14,487 - - - - - 14,487Share premium account 28,158 - - - - - 28,158Revaluation reserve 637 - - - - (164) 473Translation reserve - - - 20 - - 20Profit and loss account (23,611) - - (20) - - (23,631)Minority interest 120 - - - - - 120 -------------------------------------------------------------- Total equity 19,791 - - - - (164) 19,627 ============================================================== Reconciliation of equity at 30 June 2006 (unaudited) Notes UK GAAP a b c d e IFRS £ £ £ £ £ £Non-current assetsProperty, plant and equipment 2,017 - - - - - 2,017Goodwill 18,604 792 - - - - 19,396Available for sale financial assets 41 - - - - - 41Deferred tax assets - - 142 - 64 (164) 42 Current assetsInventories 644 - - - - - 644Trade and other receivables 7,537 - (142) - - - 7,395Cash and cash equivalents 1,373 - - - - - 1,373 Current liabilitiesTrade and other payables 6,671 - - - 213 - 6,884Short-term borrowings 2,676 - - - - - 2,676Current portion of long-term borrowings 533 - - - - - 533Current tax payable 535 - - - - - 535 Non-current liabilitiesLong-term borrowings 953 - - - - - 953 -------------------------------------------------------------- Net assets 18,848 792 - - (149) (164) 19,327 ============================================================== EquityShare capital 14,487 - - - - - 14,487Share premium account 28,158 - - - - - 28,158Revaluation reserve 629 - - - - (164) 465Translation reserve - - - (73) - - (73)Profit and loss account (24,065) 792 - 73 (149) - (23,349)Minority interest (361) - - - - - (361) ---------------------------------------------------------------- Total equity 18,848 792 - - (149) (164) 19,327 =============================================================== Reconciliation of equity at 31 December 2006 (unaudited) Notes UK GAAP a b c d e IFRS £ £ £ £ £ £ £Non-current assetsProperty, plant and equipment 1,899 - - - - - 1,899Goodwill 18,036 1,361 - - - - 19,397Available for sale financial assets 41 - - - - - 41Deferred tax assets - - 229 - - (164) 65 Current assetsInventories 187 - - - - - 187Trade and other receivables 6,864 - (229) - - - 6,635Cash and cash equivalents 1,649 - - - - - 1,649 Current liabilitiesTrade and other payables 5,073 - - - - - 5,073Short-term borrowings 2,109 - - - - - 2,109Current portion of long-term borrowings 533 - - - - - 533Current tax payable 487 - - - - - 487 Non-currentliabilitiesLong-term borrowings 894 - - - - - 894 ---------------------------------------------------- Net assets 19,580 1,361 - - - (164) 20,777 ==================================================== EquityShare capital 14,487 - - - - - 14,487Share premium account 28,158 - - - - - 28,158Revaluation reserve 620 - - - - (164) 456Translation reserve - - - 80 - - 80Profit and loss account (24,127) 1,361 - (80) - - (22,846)Minority interest 442 - - - - - 442 ----------------------------------------------------- Total equity 19,580 1,361 - - - (164) 20,777 ===================================================== Reconciliation of profit for the 6 months ended 30 June 2006 (unaudited) Notes UK GAAP a b c d e IFRS £ £ £ £ £ £ £Continuing operationsRevenue 14,476 - - - - - 14,476Cost of sales (4,543) - - - - - (4,543) --------------------------------------------------- Gross profit 9,933 - - - - - 9,933 Administrative costs (9,813) 792 - - (213) - (9,234) --------------------------------------------------- Operating profit 120 792 - - (213) - 699 Finance income 55 - - - - - 55Finance expense (166) - - - - - (166) --------------------------------------------------- Profit before tax 9 792 - - - - 588 Income tax expense (356) - - - 64 - (292) ---------------------------------------------------- (Loss)/Profit after tax (347) 792 - - (149) - 296 ==================================================== Reconciliation of profit for the year ended 31 December 2006 (unaudited) Notes UK GAAP a b c d e IFRS £ £ £ £ £ £ £Continuing operationsRevenue 31,644 - - - - - 31,644Cost of sales (11,011) - - - - - (11,011) -------------------------------------------------------- Gross profit 20,633 - - - - - 20,633 Administrative costs (20,515) 1,361 - - - - (19,154) -------------------------------------------------------- Operating profit 118 1,361 - - - - 1,479 Finance income 141 - - - - - 141Finance expense (285) - - - - - (285) ------------------------------------------------------- (Loss)/profit before tax (26) 1,361 - - - - 1,335 Income tax expense (469) - - - - - (469) ------------------------------------------------------ (Loss)/profit after tax (495) 1,361 - - - - 866 ====================================================== Notes to the reconciliations a) Goodwill recognised by the Group on acquisitions under UK GAAP wasamortised over periods of 5 to 20 years. Under IFRS goodwill is not amortised,but tested annually for impairment. The goodwill amortisation charge recognisedin accordance with UK GAAP in 2006 and the interim period has been derecognisedon transition to IFRS. b) Reclassification of deferred tax from current to non-current assets inaccordance with IAS 12 Income Taxes. c) Reclassification of translation reserve from profit and loss reserve inaccordance with IAS 21 The effects of changes in foreign exchange rates. d) Recognition of holiday pay accrual and deferred tax asset thereon underIAS 19 Employee Benefits. e) Recognition of deferred tax liability on revaluation reserve. This information is provided by RNS The company news service from the London Stock Exchange