Last checked at 23 May 2008 17:57
IQ Holdings plc
23 March 2008:
IQ Holdings Plc ("IQH" or "the Company") announces its interim results for the period ended 31 March 2008.
Contacts:
Julian Green
IQ Holdings plc
Tel: 0208 099 0560
Fiona Kindness / Gerry Beaney
Grant Thornton UK LLP (Nomad)
Tel: 0207 7383 5100
Ian Callaway / Peter Manfield
SVS Securities plc (Broker)
Tel: 0207 638 5600
Chairman's Report for 6 Months Ended 31st March 2008
I am pleased to announce the results of IQ Holdings plc ("IQH" or "the Company") for the six months ended 31st March 2008 which has seen a number of positive developments in the completion of the acquisition of Rosslyn Research Limited ("Rosslyn") and admission to AiM on 29th November 2007 and commencement of the integration of Rosslyn with the business of IQ Research Limited ("IQR").
The interim figures include a contribution from Rosslyn but show a larger than anticipated loss, which is attributed partially to the costs of the acquisition and the fact that there has been no contribution from revenue associated with IQR's life and pensions product. Although trading in the second half of the year is anticipated to improve significantly, it is unlikely that market expectations regarding the Company's profitability for the full year ended 30 September 2008 will be met.
Since the acquisition of Rosslyn, a number of initiatives have been undertaken by management to facilitate the integration with IQR. Firstly, we have initiated a dedicated resource for customer relationship management and business development which is designed to raise awareness of Rosslyn and IQR amongst their target client sectors with the objective of generating increased demand for the Company's services. This initiative is already reaping rewards in delivering new business.
Secondly, physical integration of the two businesses is well advanced with both companies now operating off a single IT platform which enables staff to work more collaboratively and efficiently. The Company has also moved into new office premises situated over a single, open-plan floor which staff find conducive to integration. The negotiation of a rent free period and lower rent than paid under the Company's previous lease, mean that the financial impact of the move is also positive.
Thirdly, IQR and Rosslyn have had three occasions when they have been able to combine the service proposition of both companies on behalf of direct clients. This outcome, in isolation, vindicates the rationale behind the acquisition of Rosslyn and its extensive data collection capabilities.
The flat turnover figures for IQR reflect the absorption of senior executive time in delivering business won at the end of last year which has had the associated negative impact on new business development initiatives. Connected with this, no further modules of the life and pensions product were sold during the period. Management's response has been to recruit a second expert in the life and pensions field to support Janette Weir in the expansion of this business area and to ensure quality delivery of projects. The impact has had an immediate positive effect in that the fourth module of the life and pensions product has now been designed and sold to a syndicate of life and pensions companies to the minimum value of £50,000 against direct development cost estimates of £20,000.
Rosslyn experienced a slow start to the period but owing to some significant contract awards at the beginning of this calendar year, has performed strongly over the second quarter. Moreover, a significant part of the new contracts will only be recognised in the second six months of the year. Management has identified the level of Requests for Quotations (RFQs) as a key performance indicator for Rosslyn and is in the process of developing a means of analysis which will enable this to be monitored in the accounts. The current level of RFQs is believed by management to have increased over the past few months as the rewards of its customer relationship management and business development programme begin to bear fruit.
The Board is confident that the integration of Rosslyn and IQR is progressing well and that both businesses expect increased levels of turnover in the coming months. At the same time, in line with its stated acquisition strategy detailed at the time of flotation, the Board is strenuously exploring acquisition opportunities which meet its target criteria, with the objective of increasing the Company's size and gaining the critical mass needed to increase shareholder value.
Tim Hearley
Chairman
23rd May 2008
UNAUDITED CONSOLIDATED INCOME STATEMENT (IFRS)
six months ended 31 MARCH 2008
| 6 months ended 31 March 2008 | 6 months ended 31 March 2007 | 12 months ended 30 September 2007 | ||
| Note | Unaudited | Unaudited | Audited | |
| £'000 | £'000 | £'000 | ||
| Continuing operations | ||||
| Revenue | 461 | 163 | 418 | |
| Cost of sales | (252) | (41) | (106) | |
| Gross profit | 209 | 122 | 312 | |
| AIM admission costs | (65) | - | - | |
| Other administrative expenses | (400) | (193) | (470) | |
| Loss from operating activities | (256) | (71) | (158) | |
| Finance income | 1 | - | 1 | |
| Finance expenses | (3) | (5) | (4) | |
| Net finance expense | (2) | (5) | (3) | |
| Loss before taxation | (258) | (76) | (161) | |
| Income tax expense | - | - | - | |
| Loss from continuing operations | (258) | (76) | (161) | |
| Basic and diluted loss per ordinary share | 4 | (0.4p) | (0.9p) | (1.7p) |
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (IFRS)
six months ended 31 MARCH 2008
| Called up share capital | Share premium account | Profit and loss account | Total equity | |
| £'000 | £'000 | £'000 | £'000 | |
| At start of period | 99 | 194 | (458) | (165) |
| Issue of shares (net of issue costs) | 246 | 789 | - | 1,035 |
| Loss for the period | - | - | (258) | (258) |
| At end of period | 345 | 983 | (716) | 612 |
For the 12 months ended 30 September 2007
| Called up share capital | Share premium account | Profit and loss account | Total equity | |
| £'000 | £'000 | £'000 | ||
| At start of period | 63 | 49 | (297) | (185) |
| Issue of shares (net of issue costs) | 36 | 145 | - | 181 |
| Loss for the period | - | - | (161) | (161) |
| At end of period | 99 | 194 | (458) | (165) |
For the six months ended 31 March 2007
| Called up share capital | Share premium account | Profit and loss account | Total equity | |
| £'000 | £'000 | £'000 | £'000 | |
| At start of period | 63 | 49 | (297) | (185) |
| Issue of shares (net of issue costs) | 36 | 145 | - | 181 |
| Loss for the period | - | - | (76) | (76) |
| At end of period | 99 | 194 | (373) | (80) |
| At 31 March 2008 Unaudited | At 31 March 2007 Unaudited | At 30 September 2007 Audited | |
| £'000 | £'000 | £'000 | |
| Non current assets | |||
| Property, plant and equipment | 5 | - | - |
| Goodwill | 1,004 | 98 | 98 |
| Total non current assets | 1,009 | 98 | 98 |
| Current assets | |||
| Trade and other receivables | 325 | 115 | 301 |
| Cash and cash equivalents | 50 | 21 | 6 |
| Total current assets | 375 | 136 | 307 |
| Total assets | 1,384 | 234 | 405 |
| Current liabilities | |||
| Bank loans and overdrafts | (78) | (17) | (42) |
| Trade and other payables | (694) | (220) | (510) |
| Total current liabilities | (772) | (237) | (552) |
| Non current liabilities | |||
| Bank loans and overdrafts | - | (40) | (18) |
| Long term borrowings | - | (37) | - |
| Total non current liabilities | - | (77) | (18) |
| Total liabilities | (772) | (314) | (570) |
| Net assets/(liabilities) | 612 | (80) | (165) |
| Capital and reserves | |||
| Called up share capital | 345 | 99 | 99 |
| Share premium account | 983 | 194 | 194 |
| Profit and loss account | (716) | (373) | (458) |
| Shareholders' funds | 612 | (80) | (165) |
UNAUDITED CONSOLIDATED BALANCE SHEET (IFRS)
AS AT 31 MARCH 2008
| Note | 6 months ended 31 March 2008 Unaudited | 6 months ended 31 March 2007 Unaudited | 12 months ended 30 September 2007 Audited | |
| £'000 | £'000 | £'000 | ||
| Net cash flow generated from operations | 6 | (138) | (143) | (30) |
| Interest paid | (2) | (5) | (5) | |
| Net cashflow from operating activities | (140) | (148) | (35) | |
| Cashflow from investing activities | ||||
| Acquisition of subsidiary undertaking | (540) | - | - | |
| Net cash outflow from investing activities | (540) | - | - | |
| Financing | ||||
| Proceeds from issue of shares | 964 | 181 | 85 | |
| Costs of share issue | (129) | - | - | |
| Net cash inflow from financing | 835 | 181 | 85 | |
| Increase in cash and cash equivalents | 155 | 33 | 50 | |
| Bank overdraft at beginning of period | (54) | (104) | (104) | |
| Bank overdraft acquired with subsidiary undertaking | (129) | - | - | |
| Bank overdraft at end of period | (28) | (71) | (54) | |
NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT (IFRS)
for the 6 months ended 31 march 2008
1 BASIS OF PREPARATION OF INTERIM REPORT
The information for the period ended 31 March 2008 is not audited and does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The statutory accounts for the year ended 30 September 2007 were given an unqualified audit report and extracts from those accounts have been adjusted above for the adoption of IFRS. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies.
The interim accounts for the six month period to 31 March 2007 were also unaudited.
2 ACCOUNTING POLICIES
Basis of Accounting
The Interim financial report has been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) for the first time. The disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS are given in note 6.
The report has been prepared on a going concern basis in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") at 30 September 2007 as well as all interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") at 30 September 2007. The group has not availed itself of early adoption options in such standards and interpretations.
The financial statements have been prepared under the historical cost basis. The principal accounting policies adopted are set out below:
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 30 September and 31 March each year. Control is achieved where the Company has the power to govern the financial and operating policies so as to obtain benefits from its activities.
Business combinations
The purchase method of accounting is used for all acquired businesses as defined by IFRS 3 - Business Combinations.
As a result of the application of the purchase method of accounting, goodwill is initially recognised as an asset being the excess at the date of acquisition of the fair value of the purchase consideration plus directly attributable costs of acquisition over the net fair values of the identifiable assets, liabilities and contingent liabilities of the subsidiaries acquired.
Where fair values are estimated on a provisional basis they are finalised within 12 months of acquisition with consequent changes to the amount of goodwill.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies into line with those used by the group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Intangible assets acquired as part of a business combination
Identifiable intangible assets acquired as part of a business combination are initially recognised separately from goodwill if the asset's fair value can be measured reliably, irrespective of whether the asset had been recognised by the acquiree before the business combination. An intangible asset is considered identifiable only if it is separable or arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.
Goodwill
Goodwill arising on consolidation represents the excess cost of acquisition over the group's interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition.
Goodwill is recognised as an asset and reviewed for impairment at least annually. Any impairment is recognised immediately in the income statement and is not subsequently reversed. Goodwill arising on acquisition before the date of transition to IFRS has been retained at the previous UK GAAP amounts subject to being tested for impairment at that date.
On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Revenue recognition
Revenue represents amounts earned under contracts to provide professional services. Revenue is recognised as earned when, and to the extent that, the firm obtains the right to consideration in exchange for its performance under these contracts. It is measured at the fair value of the right to consideration, which represents amounts chargeable to clients, including expenses and disbursements but excluding VAT. Revenue is generally recognized as contract activity progresses so that for incomplete contracts it reflects the partial performance of the contractual obligations by reference to the value of work performed. Revenue not billed to clients is included in debtors and invoices on account in excess of the relevant amount of revenue are included in deferred income.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profits for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that is no longer probable that sufficient taxable profits will be available to allow all, or part, of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives on the following bases:
Office equipment 20% reducing balance
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in income.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair values less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimate of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Financial instruments
Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.
Cash and cash equivalents
Cash and cash equivalents comprise of cash on hand and demand deposits that are subject to an insignificant risk of changes in value.
Trade receivables
Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.
Financial liability and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual agreements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments are recognised at the amount of proceeds received net of costs directly attributable to the transaction. To the extent that those proceeds exceed the par value of the shares issued they are credited to a share premium account.
Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on a n accrual basis in profit or loss using effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
Trade payables
Trade payables are not interest-bearing and are stated at their nominal value.
3 Dividends
The Company is not in a position to declare an interim dividend.
4 loss per share
The calculation is based on the loss attributable to equity shareholders divided by the weighted average number of ordinary shares in issue during the period as follows:
| 6 months ended 31 March 2008 | 6 months ended 31 March 2007 | 12 months ended 30 September 2007 | |
| £'000 | £'000 | £'000 | |
| Numerators; loss attributable to equity shareholders | 258 | 76 | 161 |
| No. '000 | No. '000 | No. '000 | |
| Denominators; weighted average number of equity shares | |||
| Basic | 64,237 | 8,917 | 9,420 |
There are no share options that have a dilutive effect during the 6 months ended 31 March 2008 and 2007 or the year ended 30 September 2007.
5 ACQUISITION OF ROSSLYN RESEARCH LIMITED
On 28 November 2007 the company completed the purchase of Rosslyn Research Limited for a consideration of £600,000. Goodwill arising on the acquisition has provisionally been calculated at £906,000. These are provisional values only and further details will be contained in the financial statements for the year to 30 September 2008. The directors have considered the carrying value of goodwill at 31 March 2008 and are satisfied that there has been no impairment in goodwill at that date
6 CASH USED IN OPERATIONS
| 6 months ended 31 March 2008 | 6 months ended 31 March 2007 | 12 months ended 30 September 2007 | |
| £'000 | £'000 | £'000 | |
| Loss from operating activities | (256) | (71) | (158) |
| Depreciation of property, plant and equipment | 1 | 1 | 1 |
| Decrease/(increase) in receivables | 34 | (6) | (192) |
| Increase/(decrease) in payables | 83 | (67) | 319 |
| Cash outflow from operations | (138) | (143) | (30) |
7 EXPLANATION OF TRANSITION TO IFRS
The Group has applied IFRS 1 "First Time Adoption of International Financial Reporting Standards" as a starting point for reporting under IFRS. The Group's date of transition is 1 October 2006 and comparative information has been restated to reflect in the Group's adoption of IFRS except where otherwise required or permitted by IFRS 1.
IFRS 1 requires an entity to comply with each IFRS and IAS effective at the reporting date for its first financial statements prepared under IFRS. As a general rule, IFRS 1 requires such standards to be applied retrospectively. However, the standard allows several optional exemptions from full retrospective application.
The Group has elected to take advantage of the following exemption. Business combinations made prior to 1 October 2006 will not be accounted for under IFRS 3 "Business Combinations" and as such the value of goodwill in the balance sheet at that date will be the same amount under IFRS as that recorded in the UK GAAP financial statements, subject to the completion of an annual impairment review
The reconciliations of equity at 1 October 2006 (date of transition to IFRS) and at 30 September 2007 (date of last UK GAAP financial statements) and the reconciliation of profit for 2006 and 2007, as required by IFRS 1, are set out below. The reconciliation of equity at 30 September 2007 and the reconciliation of profit for the six months ended 31 March 2007 are also included below to enable a comparison of the 2008 published interim figures with those published in the corresponding period of the previous financial year.
8 RECONCILIATION OF PROFIT FROM UK GAAP TO IFRS
| 6 months ended 31 March 2007 | 12 months ended 30 September 2007 | ||
| £'000 | £'000 | ||
| UK GAAP loss for the financial period | (80) | (181) | |
| Amortisation of goodwill | 4 | 20 | |
| Loss from continuing operations - IFRS | (76) | (161) |
9 RECONCILIATION OF NET ASSETS FROM UK GAAP TO IFRS
| 31 March 2007 | 30 September 2007 | ||
| £'000 | £'000 | ||
| Net assets/(liabilities) per UK GAAP | (84) | (185) | |
| Amortisation of goodwill | 4 | 20 | |
| Net assets/(liabilities) - IFRS | (80) | (165) |
Goodwill
International Financial Reporting Standards require goodwill to be frozen as at the date of transition to IFRS, 1 October 2006, and to be subject to review for impairment rather than regular amortisation. Previously amortised amounts in the UK GAAP accounts for the period ended 31 March 2007 and the year ended 30 September 2007 of £4,000 and £20,000 respectively have been reversed in the IFRS income statement. The effect of the transition on the balance sheet is shown above.
This report is available upon request from the Company's registered office at Radbourne, 56 Kenilworth Road, Leamington Spa, Warwickshire CV32 6JW.
This interim statement will be sent to shareholders shortly and, pursuant to AIM rule 20, will be made available from the Company's website http://www.iqresearch.co.uk/.