23 Dec 2009 16:29
Interactive Prospect Targeting Holdings plc
("IPTH", "the Company" or "the Group")
(AIM: "IPH")
Posting of 2008 Accounts
Annual General Meeting
Change of Company registered name
Proposed cancellation of the admission to trading on AIM of the Ordinary Shares
and Section 656 Companies Act 2006
On 18 December 2009 IPTH announced that it had issued a notice convening an Extraordinary General Meeting to be held on Monday, 4 January 2010 to approve the disposal of its French subsidiaries Directinet SA and Netcollections SAS, together with a Circular giving details of the disposal and the Board's intentions for the future. This Circular included a trading update covering 2009.
IPTH now announces that it is today posting to Shareholders the Group's Accounts for the year ended 31 December 2008 together with a notice convening the Company's 2009 Annual General Meeting to be held on Thursday,14 January 2010 and a Circular explaining the main items of business to be transacted at that Annual General Meeting.
In addition to the business that is normally transacted at an Annual General Meeting, the main items of other business are as follows:-
The proposal to change the Company's registered name to Directex Realisations plc;
The proposal to de-list the Company from AIM; and
To consider, in accordance with Section 656 of the Companies Act 2006, whether any, and if so what, steps should be taken to deal with the situation that net assets of the Company are half or less of its called-up share capital.
The 2008 Accounts, the Circular and the Notice convening the Annual General Meeting have been reproduced below.
23 December 2009
For further information:
| IPH | |
| Nicholas Ward, Executive Chairman | Tel: +44 (0) 20 7932 4410 |
| Martin Purvis | |
| Canaccord Adams | Tel: +44 (0) 20 7050 6500 |
| Mark Williams, Corporate Finance | |
| Bhavesh Patel | |
| College Hill | Tel: +44 (0) 20 7457 2020 |
| Mark Garraway, Media Enquiries | |
| Adam Aljewicz |
The unaudited Interim Results for the six months to 30 June 2009 will be published later today. In conjunction with the publication of the unaudited Interim Results, application will be made to the London Stock Exchange for resumption of trading in the Ordinary Shares on AIM and it is hoped that this will happen shortly thereafter.
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document and/or about what action you should take, you should immediately seek your own financial advice from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the Financial Services and Markets Act 2000 (as amended) if you are in the United Kingdom or, if not, another appropriately authorised independent financial adviser.
If you have sold or otherwise transferred all of your registered holding of Ordinary Shares, please forward this document, together with the accompanying Form of Proxy, to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was effected, for delivery to the purchaser or transferee. If you have sold or otherwise transferred part of your holding of Ordinary Shares, you should immediately consult the stockbroker, bank or other agent through whom the sale or transfer was effected as to what action you should take.
Interactive Prospect Targeting Holdings plc
(incorporated in England and Wales under the Companies Act 1985 with registered number 5173250)
Annual General Meeting to be held on Thursday, 14 January 2010, Change of Company registered name, Proposed cancellation of the admission to trading on AIM of the Ordinary Shares and Section 656 Companies Act 2006
Canaccord Adams Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for the Company (in its capacity as the Company's nominated adviser and broker) in connection with the arrangements described in this document. Its responsibilities as the Company's nominated adviser under the AIM Rules are owed solely to the London Stock Exchange and are not owed to the Company or to any Director or to any other person. No representation or warranty, express or implied, is made by Canaccord Adams Limited as to any of the contents of this document (without limiting the statutory rights of any person to whom this document is issued). Canaccord Adams Limited is not acting for, and will not be responsible to, any person other than the Company for providing the protections afforded to customers of Canaccord Adams Limited or for advising any other person on the contents of this document or any transaction or arrangement referred to herein.
This document should be read in its entirety. However, your attention is drawn to the letter from the Chairman of the Company which is set out in Part I of this document and which includes a recommendation that you vote in favour of the Resolutions to be proposed at the Annual General Meeting referred to below.
Notice of an Annual General Meeting of Interactive Prospect Targeting Holdings plc, to be held at the offices of Berwin Leighton Paisner LLP at Adelaide House, London Bridge, London EC4R 9HA at 4 p.m. on Thursday, 14 January 2010 is set out at Part III of this document. This Notice also satisfies the purposes of Section 656 of the Companies Act 2006. Shareholders will find enclosed a Form of Proxy for use at the Annual General Meeting. To be valid, the Form of Proxy should be completed and signed in accordance with the instructions printed thereon and returned by post or by hand to the Company's registrars, Capita Registrars, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU as soon as possible and, in any event, so as to be received no later than 4 p.m. on Tuesday, 12 January 2010. Completion and return of the Form of Proxy will not prevent a Shareholder from attending and voting in person at the Annual General Meeting.
Copies of this document will be available free of charge during normal business hours on any week day (except Saturdays, Sundays and public holidays) at the offices of Berwin Leighton Paisner LLP, Adelaide House, London Bridge, London EC4R 9HA from the date of this document until the conclusion of the Annual General Meeting.
CONTENTS
| Page | |
| Expected timetable of principal events | 3 |
| Directors, secretary and advisers | 4 |
| Definitions | 5 |
| Part I | |
| Letter from the Chairman of Interactive Prospect Targeting Holdings plc | 7 |
| Part II | |
| Explanatory Notes to the Notice of Annual General Meeting | 11 |
| Part III Notice of Annual General Meeting of Interactive Prospect Targeting Holdings plc | 12 |
Expected timetable of principal events
| Date of this document | 23 December 2009 |
| Latest time and date for receipt of completed Forms of Proxy | 4 p.m. Tuesday, 12 January 2010 |
| Annual General Meeting | 4 p.m. Thursday, 14 January 2010 |
| Last expected day of dealing in Ordinary Shares on AIM | Thursday, 21 January 2010 |
| Expected date of cancellation of Ordinary Shares from admission to trading on AIM | Friday, 22 January 2010 |
Notes:
1. References to time in this document are to the time in London, England.
2. Other than the date of this document, each of the times and dates in the above timetable is subject to change. If any of the above times and/or dates change, the revised times and/or dates will be notified to Shareholders by announcement on a Regulatory Information Service of the London Stock Exchange.
Directors, Secretary and Advisers
| Directors | Nicholas Ward (Executive Chairman) David Cicurel (Non-executive Director) Martin Kiersnowski (Director) |
| Company Secretary | Martin Purvis |
| Registered Office | 1 Vincent Square London SW1P 2PN |
| Nominated adviser and broker | Canaccord Adams Limited Cardinal Place 80 Victoria Street, 7th Floor London SW1E 5JL |
| Legal advisers to the Company | Berwin Leighton Paisner LLP Adelaide House London Bridge London EC4R 9HA |
| Registrars* | Capita Registrars Limited Northern House Woodsome Park Fenay Bridge Huddersfield West Yorkshire HD8 0GA |
Note:
* For the avoidance of doubt, Shareholders should return completed and signed Forms of Proxy to the Company's registrars at Capita Registrars, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU and not to the address referred to above.
Definitions
The following definitions apply throughout this document unless the context requires otherwise:
"2008 Accounts" the Company's report and accounts for the financial period ended 31 December 2008
"2009 Interim Results" the Company's interim results for the six month period ended 30 June 2009
"AIM" AIM, a market operated by the London Stock Exchange
"AIM Rules" the rules for companies with a class of securities admitted to AIM and their nominated advisers published by the London Stock Exchange governing admission to and the operation of AIM, as in force at the date of this document
"Annual General Meeting" the annual general meeting of the Company convened for 4 p.m. on Thursday, 14 January 2010, or any adjournment thereof, notice of which is set out at Part III of this document
"Bank" Barclays Bank PLC
"Bisnode" Bisnode AB, a company incorporated in Sweden with registered number 556341-5685 and whose registered office is at Sveavägen 168, SE-105 99 Stockholm, a wholly-owned subsidiary of the Guarantor
"Canaccord" Canaccord Adams Limited, nominated adviser and broker of the Company
"Capita Registrars" or "Registrars" Capita Registrars Limited, registrars to the Company
"Company" Interactive Prospect Targeting Holdings plc, a company incorporated in England and Wales with company registered number 5173250 and whose registered office address is 1 Vincent Square, London SW1P 2PN
"CREST" the Relevant System (as defined by the Crest Regulations) for the paperless settlement of share transfers and the holding of shares in uncertified form in respect of which Euroclear is the Operator (as defined by the Crest Regulations)
"CREST Regulations" the Uncertified Securities Regulations 2001 (SI 2001/No. 3755)
"DEL" Direct Excellence Limited, a company incorporated in England and Wales with company registered number 3896907 (formerly called Interactive Prospect Targeting Limited), a wholly-owned subsidiary of the Company
"De-listing" or "De-list" means the proposed cancellation of the Ordinary Shares from admission to trading on AIM, subject to the passing of the De-listing Resolution and it becoming effective in accordance with the AIM Rules
"De-listing Resolution" means the Resolution to be put to Shareholders at the Annual General Meeting seeking Shareholder approval of the De-listing, as set out in the Notice at Part III of this document.
"Directinet" Directinet SA, a company registered in France with registration number 431 272 616 RCS Paris and whose registered office address is 43 rue Beaubourg, 75003 Paris, a wholly-owned subsidiary of DEL
"Directors" or "Board" the directors of the Company, acting as the board of the Company for the time being, including any duly constituted committee of the Directors
"Disposal" the proposed sale by DEL to Bisnode of the entire issued share capital of the French Subsidiaries on the terms of the Sale Agreement
"EGM Circular" the circular dated 18 December 2009 issued to Shareholders in connection with the Disposal
"Euroclear" Euroclear UK & Ireland Limited, the operator of CREST
"Extraordinary General Meeting" the extraordinary general meeting of the Company to be held at the offices of Berwin Leighton Paisner LLP, Adelaide House, London Bridge, London EC4R 9HA and proposed to be convened for 4 p.m. on Monday, 4 January 2010, notice of which is set out in Part II of the EGM Circular
"Form of Proxy" the form of proxy for use in connection with the Annual General Meeting accompanying this document
"French Subsidiaries" Directinet and Netcollections
"Group" the Company, its subsidiaries and its subsidiary undertakings as at the date of this document
"London Stock Exchange" London Stock Exchange plc
"Netcollections" Netcollections SAS, a company registered in France with registration number 493 456 016 RCS Paris and whose registered office address is 43 rue Beaubourg, 75003 Paris, a wholly-owned subsidiary of DEL
"Notice" the notice of the Annual General Meeting, a copy of which is set out at Part III of this document
"NP6" NP6 SAS, a company registered in France with registration number 424 195 352 RCS Paris, and whose registered office address is 32 rue de Canteranne, 33600 Pessac, a former wholly-owned subsidiary of DEL which was sold by DEL in April 2009
"Optionholders" holders of options under the Company's option schemes in force at the date of this document
"Ordinary Shares" ordinary shares of £0.004 each in the capital of the Company
"£" or "Pounds" pounds Sterling, the lawful currency of the United Kingdom
"Resolutions" the resolutions set out in the Notice and "Resolution" shall mean any one of them
"Sale Agreement" the conditional agreement dated 11 December 2009 between DEL, Bisnode and the Guarantor and pursuant to which, subject to obtaining the consent of Shareholders and the fulfilment of other conditions precedent, DEL has agreed to sell and Bisnode has agreed to acquire the entire issued share capital of the French Subsidiaries
"Shareholder" a holder of the existing Ordinary Shares in the Company
"UK" the United Kingdom of Great Britain and Northern Ireland
PART I LETTER FROM THE CHAIRMAN
INTERACTIVE PROSPECT TARGETING HOLDINGS PLC
(incorporated in England and Wales under the Companies Act 1985 with registered number 5173250)
Directors: Registered Office:
Nicholas Ward (Executive Chairman) 1 Vincent Square
David Cicurel (Non-Executive Director) London
Martin Kiersnowski (Director) SW1P 2PN
23 December 2009
To Shareholders and, for information purposes only, Optionholders
Dear Shareholder,
Annual General Meeting to be held on Thursday, 14 January 2010, Change of Company registered name, Proposed cancellation of the admission to trading on AIM of the Ordinary Shares and Section 656 Companies Act 2006
1. Introduction
I enclose the 2008 Accounts and a Notice of the 2009 Annual General Meeting of the Company which will be held at the offices of Berwin Leighton Paisner LLP, Adelaide House, London Bridge EC4R 9HA at 4 p.m. on Thursday, 14 January 2010.
The EGM Circular published on 18 December 2009 included a letter from me which contained a full report on the issues the Board has had to address from my appointment as Executive Chairman on 19 June 2008 to the present time. Substantial extracts from the letter contained in the EGM Circular are replicated in the Chairman's Statement accompanying the 2008 Accounts.
The purpose of the Annual General Meeting is to consider:
a) and, if thought fit, approve the normal business of an annual general meeting (Resolutions 1 to 5 (inclusive) in the Notice),
b) and, if thought fit, approve two other items of business which will be proposed as special resolutions:
• the change of the Company's registered name (Resolution 6),
• the De-listing (Resolution 7), and
c) in accordance with Section 656 of the Companies Act 2006 whether any, and if so what, steps should be taken to deal with the situation that the net assets of the Company are half or less of its called-up share capital.
This letter has two purposes:
• to explain the Board's reasons for including the two additional special resolutions referred to above and to set out why the Directors consider them to be in the best interests of the Company and its Shareholders as a whole; and
• to explain the background to and reasons for the need to consider any, and if so what, steps should be taken to deal with the Section 656 issue.
2. Maximising Shareholder Value
On page 5 of the Chairman's Statement contained in the 2008 Accounts under the heading "Maximising Shareholder Value", I set out the Board's policy for maximising and realising value for Shareholders in the future.
3. Change of Company's Registered Name
Under a sale and purchase agreement dated 29 September 2008 between the Company, DEL and BDBCO No.840 Limited (company number 06688128) (now Interactive Prospect Targeting Limited) and pursuant to which DEL disposed of its core UK business, the Company (as a seller under that agreement) is obliged to take all such steps as may be reasonably required to change its name to a name other than (and not confusingly similar to) "Interactive Prospect Targeting Holdings". Such steps expressly include recommending to Shareholders a resolution to effect such a change of name. Accordingly, the Directors are proposing Resolution 6 at the Annual General Meeting to change the Company's registered name.
The name Directex Realisations plc has been chosen because of its proximity to its wholly-owned subsidiary, Direct Excellence Limited, and because it reflects the Board's policy for maximising and realising value for Shareholders in the future.
4. De-listing
Reasons for the De-listing
The Directors consider that the costs of operation of the Company should be reduced as far as is feasible and prudent to avoid further erosion of the remaining value in the Company. Amongst the most significant costs of the Company are those arising from the admission of the Ordinary Shares to trading on AIM. These costs include fees paid to the Company's brokers and Registrars, annual fees paid to the London Stock Exchange, costs relating to public announcements and fees and expenses of accountants and lawyers engaged to provide services in connection with the Ordinary Shares being admitted to AIM.
The Board believes that these costs and regulatory requirements associated with maintaining the Company's listing are a significant burden on the Company's financial resources.
Further, the Directors do not consider that the Company is accruing or is likely in the foreseeable future to accrue the benefits which an AIM listing was intended to bring to the Company and Shareholders, in terms of the ability to raise new capital, a listed stock as a currency for acquisitions and for management incentives and liquidity in ordinary share dealings.
The Directors have therefore concluded that the costs of the Company's current listing outweigh the benefits and that, accordingly, it would be in the best interests of the Company and Shareholders as a whole if the Company were to seek the De-listing of the Company.
Conditions to the De-listing becoming effective
In accordance with Rule 41 of the AIM Rules, the Company has notified the London Stock Exchange of the De-listing. The De-listing is conditional on the approval of not less than 75 per cent. of votes cast by Shareholders at the Annual General Meeting. The Company is taking the opportunity of the Annual General Meeting to be held at the offices of Berwin Leighton Paisner LLP, Adelaide House, London Bridge, London EC4R 9HA at 4 p.m. on Thursday, 14 January 2010 to propose the De-listing Resolution to Shareholders. Subject to the De-listing Resolution being passed, the Directors expect that the De-listing will become effective on or about Friday, 22 January 2010.
Principal effects of De-listing
The principal effects that the De-listing would have on Shareholders are as follows:
• There would no longer be a formal market mechanism enabling Shareholders to trade their Ordinary Shares through the market. Shareholders who currently hold Ordinary Shares in uncertificated form will receive share certificates in due course following the De-listing taking effect. While the Ordinary Shares will remain freely transferable, they may be more difficult to sell compared to the shares of companies listed on AIM. It may also be more difficult for Shareholders to determine the market value of their Ordinary Shares at any given time.
• The Company would not be bound to announce material events, nor to announce interim or final results.
• The Company would no longer be required to comply with many of the corporate governance requirements applicable to UK-listed companies.
• The Company would no longer be subject to the Disclosure Rules and Transparency Rules of the Financial Services Authority and would therefore no longer be required to disclose major shareholdings in the Company.
• Shareholders would no longer be afforded the protections given by the AIM Rules. Such protections include the requirement to be notified of certain events including, amongst other things, substantial transactions (the size of which results in a 10 per cent. threshold being reached under any one of the class tests) and related party transactions and the requirement to obtain shareholder approval for reverse takeovers (the size of which results in a 100 per cent. threshold being reached under any one of the class tests) and fundamental changes in the Company's business.
• The De-listing might have either positive or negative taxation consequences for Shareholders. Shareholders who are in any doubt about their tax position should consult their own professional independent adviser immediately.
Notwithstanding the De-listing:
• The Board intends to continue to send Shareholders copies of the Company's audited accounts and to continue to post certain information on significant transactions (if any) and other matters of Shareholder interest on the Company's website.
• The Company would remain subject to English company law, which requires shareholder approval for certain matters.
• The Company would remain subject to the provisions of the City Code on Takeovers and Mergers in accordance with its terms.
Shareholders should be aware that if the De-listing takes effect, they will at that time cease to hold shares in a company whose shares are admitted to trading on AIM and the matters set out above will automatically apply to the Company or arise from the date of De-listing.
If you retain your Ordinary Shares following De-listing, although the Ordinary Shares will remain freely tradable they will no longer be tradable on AIM and no other formal facility will be available for the trading of the Ordinary Shares.
Those Shareholders who hold their Ordinary Shares in CREST will be sent share certificates for their holding in the week commencing on 8 February 2010.
The following matters should be considered if a Shareholder wishes to effect a transaction in the Ordinary Shares following the De-listing:
• if the Shareholder has identified a purchaser, the Shareholder may effect the sale by signing and sending the duly executed and stamped stock transfer form, together with the relevant share certificate, to the Company's registrars at Capita Registrars, Northern House, Woodsome Park, Fenay Bridge, Huddersfield HD8 0GA; or
• if the Shareholder has not identified a purchaser, the Shareholder may notify the Company Secretary of the number and price at which he or she would sell such Ordinary Shares. On receipt of such notice the Company Secretary will, subject to applicable laws, notify any person(s) he is aware of who has (have) shown an interest in purchasing Ordinary Shares and provide the contact details of the prospective seller to such person(s). The Company cannot provide any guarantees that this will lead to any information being forwarded or a sale of such Ordinary Shares.
5. Section 656 Companies Act 2006 (Loss of Capital)
Section 656 of the Companies Act 2006 ("Section 656") provides that, where the net assets of a public company are half or less of its called-up share capital, in such circumstances, the directors must call a general meeting of the company to consider whether any, and if so what, steps should be taken to deal with the situation.
The Section 656 shortfall came to light when the 2008 Accounts were finalised following exchange of the Sale Agreement. The Balance Sheet of the Company as at 31 December 2008 shows negative net assets of £67,217, which is less than half the share capital of the Company of £202,075.
As a result, the Directors have concluded that the Company has fallen below the threshold prescribed by Section 656 and therefore the Board has convened the Annual General Meeting to consider whether any, and if so what, steps should be taken to deal with this situation.
The Board believes that the issue of the Section 656 shortfall has been addressed by the sale of the French Subsidiaries and by the policy for maximising and realising value for Shareholders in the future as referred to above. Against this background, the Board has taken, and continues to take, action that it believes is appropriate to address the current circumstances of the Group. Accordingly, the Board does not propose to recommend at the Annual General Meeting that any additional action be taken to deal with the Group's situation and therefore no resolutions are being proposed to address this situation.
6. 2009 Interim Results
Now that the 2008 Accounts have been completed, the 2009 Interim Results are being finalised and are expected to be published on or about 23 December 2009.
On publication of the 2009 Interim Results, application will be made to the Stock Exchange for resumption of trading in the Ordinary Shares on AIM, and it is hoped this will happen shortly thereafter.
7. Action to be taken
Shareholders will find enclosed with the Notice in this document a Form of Proxy for use in connection with the Annual General Meeting to be held at the offices of Berwin Leighton Paisner LLP, Adelaide House, London Bridge, London EC4R 9HA at 4 p.m. on Thursday, 14 January 2010. Whether or not you intend to be present at the Annual General Meeting you are requested to complete, sign and return the Form of Proxy in accordance with the instructions printed on it so as to be received by the Company's Registrar, Capita Registrars, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU, as soon as possible and, in any event, so as to arrive no later than 4 p.m. on Tuesday, 12 January 2010, being 48 hours before the time appointed for the holding of the Annual General Meeting. The completion and return of the Form of Proxy will not preclude Shareholders from attending and voting at the Annual General Meeting in person should they subsequently decide to do so.
8. Recommendation
The Directors unanimously recommend that Shareholders vote in favour of all of the Resolutions, as they intend to do in respect of, in aggregate, 2,428,000 Ordinary Shares in which they are interested, representing approximately 4.8 per cent. of the existing issued Ordinary Shares.
Yours faithfully
Nicholas WardExecutive Chairman
PART II EXPLANATORY NOTES TO THE NOTICE
The purpose of the Annual General Meeting is to consider:
a) and, if thought fit, approve the normal business of an annual general meeting (Resolutions 1 to 5 (inclusive) in the Notice),
b) and, if thought fit, approve two other items of business which will be proposed as special resolutions:
• the change of the Company's registered name (Resolution 6),
• the De-listing (Resolution 7), and
c) in accordance with section 656 of the Companies Act 2006 whether any, and if so what, steps should be taken to deal with the situation that the net assets of the Company are half or less of its called-up share capital.
Resolution 1 - Report and Accounts
The Directors are required to present to the Annual General Meeting the 2008 Accounts.
Resolutions 2 and 3 - Re-appointment and remuneration of auditors
Resolutions 2 and 3 propose the re-appointment of Deloitte & Touche LLP as auditors of the Company and authorise the Directors to set their remuneration.
Resolutions 4 and 5 - Re-appointment of directors
Under the Company's articles of association, one-third of the Directors are required to retire by rotation each year and no Director may serve for more than three years without being re-appointed by Shareholders. In addition all newly appointed Directors retire at their first annual general meeting following their appointment.
It is proposed that Martin Kiersnowski be re-appointed as a Director who, having been elected as a Director since the Company's annual general meeting in 2008, retires in accordance with Article 22.5 of the Company's articles of association and who, being eligible, offers himself for re-appointment in accordance with Article 22.6 of the Company's articles of association. It is also proposed to re-appoint David Cicurel, who retires by rotation in accordance with Article 22.5 of the Company's articles of association and who, being eligible, offers himself for re-appointment in accordance with Article 22.6 of the Company's articles of association
Biographical details of the Directors standing for re-election appear on page 10 of the 2008 Accounts.
Resolution 6 - Change of the Company's registered name
As explained in the Chairman's letter at Part I of this document, Resolution 6 is being proposed in order to secure Shareholder approval to change the Company's registered name to Directex Realisations plc.
Resolution 7 - De-listing from AIM
As explained in the Chairman's letter at Part I of this document, Resolution 7 is being proposed in order to secure Shareholder approval, as required by Rule 41 of the AIM Rules, to the De-listing.
PART III NOTICE OF ANNUAL GENERAL MEETING
INTERACTIVE PROSPECT TARGETING HOLDINGS PLC (the "Company")
NOTICE IS HEREBY GIVEN that the 2009 Annual General Meeting of the Company will be held at 4 p.m. on Thursday, 14 January 2010 at the offices of Berwin Leighton Paisner LLP, Adelaide House, London Bridge, London EC4R 9HA to consider and, if thought fit, pass the following resolutions, of which numbers 1 to 5 (inclusive) will be proposed as ordinary resolutions and numbers 6 and 7 as special resolutions and to consider, in accordance with Section 656 of the Companies Act 2006 whether any, and if so what, steps should be taken to deal with the situation that the net assets of the Company are half or less of its called-up share capital:
ORDINARY RESOLUTIONS
1 To receive, consider and adopt the financial statements of the Company for the financial period ended 31 December 2008 together with the report of the directors of the Company (the "Directors") and the auditors of the Company (the "Auditors").
2 To re-appoint Deloitte & Touche LLP as Auditors of the Company to hold office from the conclusion of the Annual General Meeting to the conclusion of the next meeting at which accounts are laid before the Company.
3. To authorise the Directors to agree the Auditor's remuneration.
4. To re-appoint Martin Kiersnowski as a Director who, having been elected as a Director at the Company's annual general meeting in 2008, retires in accordance with Article 22.5 of the Company's articles of association and who, being eligible, offers himself for re-appointment in accordance with Article 22.6 of the Company's articles of association.
5. To re-appoint David Cicurel, who retires by rotation in accordance with Article 22.5 of the Company's articles of association and who, being eligible, offers himself for re-appointment in accordance with Article 22.6 of the Company's articles of association.
SPECIAL RESOLUTIONS
6. That the name of the Company be changed to Directex Realisations plc.
7. That admission of the Company's Ordinary Shares to trading on AIM, a market operated by the London Stock Exchange plc, be cancelled with effect from the earliest practicable date and that the Directors of the Company (or a duly authorised committee thereof) be and are hereby authorised to take all steps which are necessary or desirable in order to effect such cancellation.
SECTION 656 COMPANIES ACT 2006
To consider, in accordance with Section 656 of the Companies Act 2006 whether any, and if so what, steps should be taken to deal with the situation that the net assets of the Company are half or less of its called-up share capital.
By order of the BoardMartin T A PurvisCompany Secretary
Registered Office 1 Vincent Square London SW1P 2PN Registered Number: 5173250
Dated: 23 December 2009
EXPLANATORY NOTES TO THE NOTICE OF ANNUAL GENERAL MEETING
1. Members entitled to attend, speak and vote at the Annual General Meeting may appoint a proxy or proxies (who need not be a member of the Company) to exercise these rights in their place at the Annual General Meeting. A member may appoint more than one proxy, provided that each proxy is appointed to exercise the rights attached to different shares. You may not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy please use separate forms.
2. A form of proxy is enclosed with this Notice. To be valid, the form of proxy must reach the Company's registrars, Capita Registrars, at PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU not less than 48 hours before the time fixed for the Annual General Meeting or any adjournment thereof. Details of the procedure for appointing a proxy or proxies are contained on the proxy form. Appointment of a proxy will not prevent a member from attending the Annual General Meeting and voting in person. If you have appointed a proxy and attend the annual general meeting in person, your proxy appointment will automatically be terminated.
3. The Company, pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, specifies that only those members on the register of members of the Company as at 6 p.m. on Tuesday, 12 January 2010 (or, if the Annual General Meeting is adjourned, members on the register of members not later than 48 hours before the time fixed for the adjourned meeting) are entitled to attend and vote at the Annual General Meeting in respect of the shares registered in their names at that time. Subsequent changes to the register shall be disregarded in determining the rights of any person to attend and vote at the Annual General Meeting.
4. In the case of joint holders, the signature of only one of the joint holders is required on the proxy form but the first named on the register of members of the Company will be accepted to the exclusion of the other joint holders.
Interactive Prospect Targeting Holdings plc
Annual Report & Accounts 2008
Contents
| Chairman's statement | 2 |
| Business review | 8 |
| Directors and senior managers | 10 |
| Directors' report | 11 |
| Corporate governance report | 15 |
| Remuneration report | 18 |
| Independent auditors' report | 21 |
| Consolidated income statement | 23 |
| Consolidated statement of recognised income and expenses | 24 |
| Consolidated balance sheet | 25 |
| Consolidated cash flow statement | 26 |
| Notes to the consolidated financial statements | 27 |
| Company balance sheet | 53 |
| Notes to the Company financial statements | 54 |
Chairman's statement
Year to 31 December 2008
Background
I was appointed Executive Chairman on 19 June 2008, following the announcement on 15 April 2008 of disappointing results for the year to 31 December 2007. These results came after a number of profit warnings and the earlier withdrawal of a preferred bidder for the acquisition of the Group as a whole following extensive due diligence.
I think it is appropriate that my Chairman's Statement should give a full report on the issues the Board has had to address from the date of my appointment as Chairman to the present time, and what the immediate future holds.
Strategic and Operational Review
My first task was to take charge of a strategic and operational review of the Group which had been initiated by the Group's former management.
The Board appointed PricewaterhouseCoopers and Berwin Leighton Paisner to help in this review. Subsequently, a number of experienced turnaround professionals were appointed to assist on an interim basis in the review and in the on-going operational management of the Group.
An urgent assessment was made of the financial health of the Group's UK operations and it became clear that the Group faced a number of serious strategic and operational problems:
• There had been a considerable deterioration in the performance of the Core UK Business (comprising of MyOffers, CLG, WebBrands, List Rental and MyPropertySpy), which was trading significantly below former management's budgets and was loss-making. It also became clear that it was necessary to make significant write-offs of the trade debtors of the Core UK Business, some of these debts having arisen in 2008 and some in earlier periods. The Board and its advisers reviewed a number of options for the Core UK Business in the overall context of the Group, especially the shortage of cash in the UK. The Board concluded that it was essential that the Core UK Business be disposed of as quickly as possible.
• Taken together, the smaller UK businesses were not profitable and had no strategic relevance to the Group. The Board concluded that they too should be sold.
• The Group's €6.5 million loan from Barclays Bank was in default and it was necessary for the Board to enter into discussions with the Bank regarding the Group's indebtedness position and funding requirements.
• The Group's three French businesses (Directinet, NP6 and Netcollections) (the "French Businesses") were trading in line with their budgets and were profitable and cash generative. However, due to French dividend regulations and the earnout arrangements entered into in connection with the acquisition of Directinet and NP6, the Group was precluded from remitting to the UK any of the surplus cash resources within these businesses at the time of the review. These issues were particularly serious in the case of Directinet, where relations with the original founders of that company, five of whom constituted the top management of Directinet, had deteriorated in the first half of 2008 to the point that the President of Directinet had resigned from the Board and the Directinet founders and related persons had initiated legal action against the Group.
In effect, what started as a strategic review turned into a fight for the survival of the Group.
Initial Strategy
Against this serious background, the Board decided in August 2008 to pursue the following strategy for preserving and restoring some value for Shareholders:
• To dispose of or close all of the UK activities as quickly as possible.
• To exercise control over the French Businesses as quickly as possible with a view to accessing their cash resources and putting in place arrangements for their long-term management.
• To negotiate with Barclays Bank with a view to restructuring the e6.5 million loan so that it could be paid off over a period as dividends were received from the French Businesses.
• To run the three French Businesses as one integrated business which could either be sold in due course or could be used as a platform for further expansion.
UK Disposals
Having decided on this strategy, the Board took urgent action to dispose of most of the Group's activities in the UK. The sale of the various businesses was announced as follows:
• The Core UK Business on 29 September 2008. This sale did not include the Group's offices at Vincent Square, London SW1, to which I refer later.
• The Integra Insight business on 4 November 2008.
• Real World Customer Experience, including its TPoll Market Intelligence and Stimulating World Research Company, on 4 November 2008.
• Newsletters On-Line, Smart Quotes and Everyinvestor on 11 November 2008.
The effect of these sales was to protect the Group from further losses from these businesses and to realise sufficient funds to enable the Group's remaining UK companies to continue to operate on a solvent basis whilst the Board tackled the issues relating to the French Businesses.
It was an important feature of these sales that most of the outstanding trade creditors, commitments to customers, employment contracts and other similar obligations in respect of these businesses were assumed by the new buyers or retained by the companies that were sold.
The Group's only remaining UK business, EmailBureau, was transferred on 2 October 2008 to MailPerformance UK, which was established as a UK subsidiary of NP6.
Restructuring of Barclays Bank Debt
In parallel with negotiations for the disposal of the Core UK Business, the Board entered into discussions with Barclays Bank and was able to agree new arrangements which, on the basis of the projections then available to the Board in respect of the French Businesses, would have enabled the Group to retain these companies and repay the Bank debt out of dividends from them.
Agreement in principle to the restructuring was announced at the time of the sale of the Core UK Business on 29 September 2008, and the completion of the restructuring was announced on 27 October 2008. As part of this arrangement, the Group was required to agree to a restructuring fee of e650,000 which was added to the principal amount of the Barclays Bank debt, bringing the total to €7,150,000.
It was a condition of the restructuring that certain conditions, including the agreement of certain financial covenants, had to be fulfilled by 15 December 2008. As announced on 30 December 2008, the Group was not able to fulfil some of these conditions and the Board received formal notification from Barclays Bank on 29 December that the Group was in default under the terms of the restructuring. In this notification, Barclays Bank confirmed that it had no current intention of enforcing its rights or taking any immediate action in respect of the breaches under the terms of the restructuring, but it reserved its right to do so. This has continued to be the case up to the present time.
Disputes Relating to the French Businesses
Having sold the Core UK Business and restructured the Bank facility, the Board then opened discussions with the vendors of Directinet and NP6 with three main objectives:
• To resolve issues arising from the earn out arrangements entered into at the time each of these companies were acquired.
• To secure access to the surplus funds in these companies as quickly as possible.
• To put in place arrangements for the long term management of the French Businesses on an integrated basis.
These negotiations were especially difficult because of the composition of the boards of its main French subsidiaries. In the case of Directinet, the Group had only two directors, with the remaining six directors being the representatives of the original founders who had sold Directinet to the Group. In the case of NP6, the Group did not have a single representative on the board. The President of a French company has widespread powers under French company law, and the Presidents of Directinet and NP6 were both representatives of the founders/vendors of these companies.
The Board achieved its three objectives in relation to Directinet on 5 November 2008 and since then has had majority representation on the board of Directinet together with access to its cash resources within the framework allowed by French law. One of the five original founders of Directinet left the Group immediately, and the other four left after a short transition period. A new management team was installed, as announced on 13 February 2009.
This settlement in relation to Directinet was achieved on very satisfactory terms and provided access to Directinet's surplus cash, which has proved crucial to the survival of the Group since then.
Discussions with the original NP6 vendors were initiated at about the same time as those with the vendors of Directinet, but took longer. The Group announced on 11 February 2009 that its negotiations with the original NP6 vendors had not thus far been productive and that the President of NP6 had ceased to be a member of the Board. The uncertainty as to the outcome of these negotiations led the Board to request suspension of trading in the Company's shares on AIM and the suspension took effect on 11 February 2009. All this followed the initiation of legal proceedings against the Group by the original NP6 vendors.
The Board subsequently announced on 17 April 2009 that the Group had entered into settlement and sale agreements with the original NP6 vendors, under which the Group sold NP6 (including MailPerformance UK) to a private equity backed vehicle of the original NP6 vendors and all of the disputes that existed between the original NP6 vendors and the Group were fully and finally settled.
NP6 was sold at a price that was significantly less than that paid when NP6 was acquired in 2007, but, nevertheless, the Board was satisfied that a good result had been achieved, especially bearing in mind the changed economic conditions and the commitment that had been made in respect of earnout payments at the time of acquisition.
Following the settlement with the original NP6 vendors, trading in the Company's shares on AIM was reinstated on 17 April 2009.
The cash consideration from the sale of NP6 was used to reduce bank indebtedness by €3.25 million to €3.9 million.
Revised Strategy
The decision to sell NP6 as part of the settlement with the original NP6 vendors, and the fact that the Bank debt was again in default, caused the Board to review the Initial Strategy referred to above. Since April 2009, the Board's key priorities have been as follows:
• The performance of Directinet and Netcollections, which are now increasingly managed as one business. Both companies performed very well in 2008, which was the last year of the earnout arrangements agreed at the time of the acquisition of Directinet. However, whilst Netcollections has continued to perform well in 2009, Directinet's trading has reflected the adverse economic conditions that the industry in France faced throughout 2009, with many advertisers having reduced their marketing spend and/or taking marketing-related decisions at a much higher level in their organisations, frequent rescheduling and deferment by customers of campaigns that had already been booked, and reduced volumes in customer acquisition activity. I would like to pay tribute to the new management team who took over in February following the departure of the five original founders at the end of their final earnout period. I believe that the new management team has done well to keep Directinet and Netcollections intact and profitable in very difficult circumstances.
• The repayment of the balance of the Barclays Bank loan which remains in default. Based on the deteriorating performance of Directinet, the Board felt that it could not rely on the two remaining French subsidiaries to generate sufficient dividends to enable the residual bank loan to be repaid within an acceptable timeframe, and that the only way the Board could repay the Barclays Bank loan would be from the proceeds of sale of Directinet and Netcollections.
• The vacant Vincent Square offices. These comprise a total of approximately 12,000 square feet held through three separate leases which were entered into by the previous Group management as recently as December 2007. These premises have largely been vacant following the sale of the UK businesses last year and they have been a heavy drain on the Group's resources, particularly the very scarce resources in the UK. The Vincent Square outgoings have been at a level which cannot be sustained out of the earnings of Directinet and Netcollections at a time when the Group also needs to repay its Barclays Bank debt. The next break point is not until 2014. The Board considered that there was very little prospect of assigning these leases to third parties on satisfactory terms within the timescale available to the Board, and that the best way of eliminating these obligations was that there be negotiations with the landlord with a view to surrendering the leases as quickly as possible, with the surrender price being paid from the proceeds of the sale of Directinet and Netcollections.
• The level of the Group's overheads and the other costs that the Board has been incurring as it has addressed the three items referred to above.
Sale of Directinet and Netcollections
In May 2009 the Board initiated a sale process with a view to finding a buyer for Directinet and Netcollections. An announcement was made on 9 July 2009 that the Group had received indicative proposals that may or may not result in an offer being made to acquire these companies.
Following discussions over an extensive period with a number of parties, the Board announced on 11 December 2009 that it has reached agreement with Bisnode AB for the sale of Directinet and Netcollections. The disposal is subject to a number of conditions which include the following:
• the approval of Shareholders, which will be sought at the Company's Extraordinary General Meeting on 4 January 2010;
• the release of all relevant encumbrances in particular part of Barclays Bank PLC's security which is expected to be obtained at completion; and
• the buyer not exercising its right to terminate the Sale and Purchase Agreement if a relevant breach of warranty occurs prior to completion.
The amount receivable by the Group in respect of this sale comprises:
• An "Initial Consideration" of €7,000,000; and
• A "Balance Consideration" of €350,000
Subject to adjustments to take in account the "Actual Net Cash Amount" and the "Adjusted Working Capital Amount" of Directinet and Netcollections on 31 December 2009 as defined in the Sale and Purchase Agreement ("Adjustments").
The Initial Consideration is payable on completion of the sale which is expected on or about 6 January 2010. The Balance Consideration (subject to the Adjustments) is payable following (i) the production of the accounts of Directinet and Netcollections for the year ended 31 December 2009 (by no later than 31 March 2010); and (ii) agreement on the extent of the Adjustments derived from those accounts. The Adjustments will vary on a day to day basis depending upon the cash flow and trading performance of Directinet and Netcollections.
The Sale and Purchase Agreement also provides for the possibility of an "Additional Consideration" of up to €1,000,000 linked to the operating performance of Directinet and Netcollections in 2009, but, as defined in the Sale and Purchase Agreement based on the latest forecast of the current profitability of these companies, this is not expected to realise any further cash amounts.
In addition to the sale proceeds, the Group expects to receive settlement of amounts due by Directinet and Netcollections, amounting at the end of November 2009, to approximately €480,000. It is currently expected that the majority of this will be paid before completion with any balance paid by 31 March 2010.
The Group has given a number of warranties, but the Group's liability under them is capped at €100,000.
The total sale proceeds are below the aggregate of the price paid for Directinet when it was purchased in 2006 plus the amount that has been invested in Netcollections since it was formed in 2007. However, the Board believes that the price that has been obtained is the best price available at the present time and in the current economic climate, and that it is very much in the interests of the Group as a whole, and of Shareholders in particular, that Directinet and Netcollections should be sold on the basis negotiated.
Repayment of Barclays Bank Loan
The current outstanding Barclays Bank PLC loan of €3,900,000 plus accrued interest and certain bank fees will be repaid in full on completion of the sale of Directinet and Netcollections. The Bank retains its warrants to subscribe in cash for up to 3,000,000 ordinary shares in the Company at £0.004 per share.
The Board is grateful for the support it has received from the Bank over the last eighteen months or so since the original defaults first came to light.
Vincent Square
Since March 2009, the Board has been in discussion with the landlord of the Group's head offices at Vincent Square with a view to agreeing terms for the surrender of the Company's leasehold interests.
The Board announced on 11 December 2009 that an agreement had been signed with the Vincent Square landlord under which the Group has acquired an option to assign the Vincent Square leases to the landlord's ultimate parent company shortly after the completion of the proposed sale of Directinet and Netcollections, thereby extinguishing all the Group's obligations under those leases.
The net cost of these assignments will be approximately £1,000,000 which will be satisfied out of the sale proceeds of Directinet and Netcollections. The Board has been advised that this is a good outcome for the Group and that the potential liability could have been significantly higher.
Maximising Shareholder Value
Once the sale of Directinet and Netcollections has been completed and the Bank and the Vincent Square landlord have been repaid, the Board intends to continue to manage the Group's interests with a view to maximising Shareholder value. Having previously disposed of its wholly-owned online direct marketing businesses in the UK and having sold NP6, with the sale of Directinet and Netcollections the Group will have disposed of its remaining subsidiaries and the former principal activity of the Group of providing online direct marketing will cease. Following the sale, the Group will comprise the Company and its principal wholly-owned subsidiary, Direct Excellence, and these companies will continue to trade as going concern investment holding companies whilst the Board seeks to maximise Shareholder value. This will involve the following:
• Dealing with post-completion issues in relation to the sale of Directinet and Netcollections, including the collection of any further amounts of consideration and the resolution of any warranty claims.
• Optimising the value of the Group's 12.2% interest in the ordinary share capital of Web-Clubs Limited ("WCL"), an online marketing business which is a closely held private company and in which the Group has had an investment for some years.
• Realising any remaining tax recoveries in France.
• Settling any remaining liabilities.
• Maximising the return from surplus funds held by the Group.
• Keeping the Group overhead as low as possible.
• Considering how best to return funds to Shareholders.
To mark this new phase in the Group's life, the Board proposes that the name of the Company be changed to Directex Realisations Plc and a resolution to this effect will be put to Shareholders at the forthcoming Annual General Meeting.
Restructuring Costs
During the past eighteen months or so, the Board has carefully considered the interests of Shareholders and other stakeholders, particularly the Group's creditors and employees. The various actions described above, (the UK disposals, the restructuring of the Bank debt and subsequent discussions with the Bank, the negotiations and litigation relating to the vendors of Directinet and NP6, the process of selling Directinet and Netcollections, and the negotiations with the Vincent Square landlord), have all been taken with these interests in mind, but they have been expensive in terms of professional fees, interim management fees and other restructuring costs. These costs have been very large in the context of the size of the Group, but they reflect the complexity of the issues the Board has had to address and the fact that we are an AIM-listed company.
These costs have, though, been partly offset by savings on earnout payments that the Group might otherwise have had to make.
Accounts and Going Concern
Having decided to follow the various courses of action referred to above, the Directors have prepared the 2008 Accounts on a going concern basis.
However, the ability of the Group to continue as a going concern depends upon three key issues:
• The approval by Shareholders of the proposed sale of Directinet and Netcollections, and the subsequent completion of the Sale and Purchase Agreement following satisfaction of the other conditions precedent.
• The continued support of Barclays Bank until completion and the repayment of their debt at completion.
• The surrender of the Vincent Square leases on the basis negotiated with the landlord, settlement of which will be made from the proceeds of sale of Directinet and Netcollections.
Interim Results - six months to June 2009
The Group's Interim Results for the half year to 30 June 2009 are expected to be published by no later than 23 December 2009 and will therefore be available to Shareholders before the Extraordinary General Meeting.
Section 656 Companies Act 2006
Section 656 of the Companies 2006 Act provides that where the net assets of a public company are half or less of the amount of its called-up share capital, the directors must call a general meeting of the company to consider whether any and if so what steps should be taken to deal with the situation. The directors must do this no later than 28 days from the earliest day on which the fact is known to a director of the company.
The Balance sheet of the Company as at 31 December 2008 (page 53) shows negative net assets of £67,217, which is less than half the share capital of the Company of £202,075.
The net assets of the company reflect the value of its interest in its wholly owed subsidiary, Direct Excellence Limited, which in turn reflects the underlying carrying value at 31 December 2008 of its interest in Directinet and Netcollections.
The Section 656 shortfall came to light when the 2008 accounts were finalised following signature of the conditional agreement for the sale of Directinet and Netcollections on 11 December 2009.
The Board believes that the issue of the Section 656 shortfall has been addressed by the sale of Directinet and Netcollections and does not propose taking any further action.
AIM Listing
As a consequence of the necessary delay in publishing the 2008 Accounts, trading in the Ordinary Shares on AIM was suspended from 24 June 2009 and they currently remain suspended pending the publication of the 2008 Accounts and the Interim Results.
Once the 2008 Accounts are sent to Shareholders, and the Interim Results for the half year to 30 June 2009 published, application will be made to the Stock Exchange for resumption of trading in the shares on AIM, and it is hoped that this will happen shortly thereafter.
The Board has concluded that the remaining activities are too small to warrant the continuation of the AIM listing and will be recommending to Shareholders at the 2009 Annual General Meeting which is to be held on 14 January 2010 that the Company be de-listed from AIM. If the resolution is approved, de-listing will take place on or about 22 January 2010.
General Meetings
Further particulars of the sale of Directinet and Netcollections are set out in the Circular to Shareholders together with the Notice convening an Extraordinary General Meeting for 4 January 2010 at which the ordinary resolution for the approval of the disposal will be put to Shareholders.
Together with the issue of the 2008 Accounts, the Group will issue a circular convening the 2009 Annual General Meeting which will contain further particulars of the de-listing proposal and other business.
Conclusion
The last eighteen months or so have been extremely difficult for all stakeholders in the Group and the Board is grateful for the support and encouragement it has received from many of them.
The out-turn has been especially disappointing for our Shareholders. There have been a number of occasions over the last year when there was a real possibility that the Group might have to enter into an insolvency procedure in the UK, with no return for Shareholders. Every action taken by the Board during this period has had due regard to both Shareholder and wider stakeholder interests.
Nicholas Ward
Executive Chairman
17 December 2009
Business review
Year to 31 December 2008
Nature of the Business
The Group now operates in France through its Paris based operating subsidiaries Directinet and Netcollections.
The Group provides online direct marketing services. These include broking lists of e-mail addresses, building and management of prospect databases, electronic customer relationship management and acquisition of e-mail addresses for sale and rental.
The Group previously carried out e-mail broadcasting through its French subsidiary, NP6, which was sold in April 2009. It also previously operated through a number of UK based subsidiaries which were sold during the year.
On 11 December 2009 the Group reached agreement for the sale of Directinet and Netcollections, subject to a number of conditions including shareholders' consent, which is expected to complete on or about 6 January 2010.
Financial Review
Results of the group are reported on page 23 of the accounts.
Revenue
Revenue from continuing operations increased from £15.8m to £22.3m, an increase of 41%. This includes the benefit of a full year for NP6, which was acquired in June 2007, and Netcollections, which commenced trading in August 2007. The French businesses traded well, both in the email brokerage and email delivery sectors. A number of product launches helped maintain a leading market position. Netcollections has built a database of over 1.1m members enhancing its capacity to deliver prospect data to clients. Directinet has upgraded the technology underpinning its Abonews co-registration network and invested in its 'eCRM' consultancy service. NP6 opened a Paris sales office and launched a new version of its email broadcasting platform MailPerformance.
Revenue from discontinued operations decreased from £17.4m to £10.2m, a decrease of 41%, due to continued pressure on data sales from performance-based competitors.
Gross Margin and Gross Profit
Gross profit from continuing operations increased from £10.1 to £15.4m. Gross profit margins improved from 64% to 69%. This is due significantly to the inclusion of the full year results of NP6, with its higher margins. Margin percentages improved in 2008 in each of the three French operating subsidiaries.
Gross profit from discontinued operations decreased from £11.7m to £5.8m. Gross profit margins declined from 66% to 57% due to reduced revenues in higher margin products such as list rental.
Administrative expenses
Administrative expenses include sales and support service costs for the business, together with the various central overheads of the Group, amortisation and impairment costs. Administration expenses for continuing operations increased significantly from £10.1m to £44.9m, an increase of 345%. The increase in administration expenses was due to goodwill impairment losses of £27.5m incurred after a review of the carrying value of the Directinet and NP6 businesses. The Group also incurred restructuring costs of £4.5m relating to the onerous lease obligation for the Vincent Square property, professional fees, interim management and other restructuring costs.
Administration expenses for discontinued operations increased from £11.0m to £13.5m, an increase of 23%. The increase was due to goodwill impairment losses of £4.3m, acquisition related intangible asset impairments of £0.8m and data cost impairments of £1.6m within the UK businesses, offset by reduction due to the disposals of the businesses prior to the year end.
Finance Costs
Finance costs amounted to £2.6m (2007: £1.7m) reflecting the cost associated with acquisitions of Directinet, TPoll and NP6. These included notional interest of £0.3m (2007: £0.6m) and foreign currency translation adjustment of £1.0m (2007: £0.5m) on deferred consideration; foreign currency translation of £0.4m (2007: £0.4m), interest of £0.4m (2007: £0.1m) and a £0.5m (2007: £nil) restructuring fee on the Group's loan.
On 12 September 2008, the Board formally recognized the nature of the loan as a hedge against the investment in NP6, which it was entered into to fund. The interest cost increase reflected the first full year of the €6.5m loan, which was taken out in June 2007, the increase in the loan by a 10% rescheduling fee and an increase in Bank margin.
The costs of €650,000 for rescheduling the Bank loan are included in Finance costs in the consolidated Group income statement on page 23.
Loss on sale
As a result of the disposal of the UK subsidiaries, the Group incurred a total loss on sale of £0.9m, included in discontinued operations. Total consideration of £1.6m was received for assets and liabilities sold of £3.8m and £1.3m respectively.
Taxation
The Group incurred taxation charges in France. It incurred tax losses in the UK, but has insufficient historic profits or expected future profits in the UK available to utilize these losses.
Capital expenditure
Data acquisition costs of £0.6m (2007: £1.1m) were capitalised in the year. Of these, £0.2m (2007: £nil) were capitalised in France and will be written off over 3 years.
Capital expenditure on computer and other equipment was £0.4m (2007: £0.6m).
Capital Structure
The Group was funded at 31 December 2008 by equity capital, the Bank loan and the deferred consideration payable to the NP6 vendors (which has since been settled as part of the disposal of NP6).
Cash flow
Cash and cash equivalents decreased to £3.7m (2007: £4.7m). This includes the generation of £3.0m (2007: £0.6m) in net cash from operating activities, deferred consideration payments of £3.2m (2007: £1m) and £1.3m cash inflow (2007: £4.6 cash outflow) from the disposal/acquisition of subsidiaries.
Future Outlook
With the generally weak economic conditions, 2009 trading has been negatively affected by a reduction in client marketing budgets. This has been reflected in the results shown by the management accounts so far in 2009. Results are expected to continue to be at significantly lower levels than 2008.
Despite the downturn in profits the French operation is well-positioned with an established quality database, long term customer relationships and good management.
Once the sale of Directinet and Netcollections has been completed and the Bank and the Vincent Square landlord have been repaid, the Board intends to continue to manage the Group's interests with a view to maximising Shareholder value. Having previously disposed of its wholly-owned online direct marketing businesses in the UK and having sold NP6, with the sale of Directinet and Netcollections the Group will have disposed of its remaining subsidiaries and the former principal activity of the Group of providing online direct marketing will cease. Following the sale, the Group will comprise the Company and its principal wholly-owned subsidiary, Direct Excellence, and these companies will continue to trade as going concern investment holding companies whilst the Board seeks to maximise Shareholder value.
Risks and Uncertainties
The Group has lease liabilities, corporate obligations in relation to UK companies within the Group, a bank loan to service and obligations under its disposal contracts. The Group is therefore dependent on the performance of its residual French operations, the amount which may be realised on their disposal and continued support from Barclays to continue to meet its obligations. The Directors continue to be of the view that it is appropriate to prepare the financial statements on a going concern basis. More details on going concern are included within the Directors Report on page 11.
The French operations are subject to uncertainties in economic outlook. There are commercial and operational risks inherent in managing a business. The Group recruited experienced local management to drive forward the businesses and to make operations more professional.
Approved by the Board of Directors on 17 December 2009 and signed on behalf of the Board
Martin Purvis
Company Secretary
Directors and senior managers
Year to 31 December 2008
Directors
Nicholas Ward - Executive Chairman
Nicholas was appointed to the Board and Chairman of the Company in June 2008. He has wide-ranging business experience. Much of his recent business career has been spent as a company 'turnaround' specialist and he has helped a number of businesses to restructure and to optimize their performance and value. He is a Fellow of the Institute of Chartered Accountants in England and Wales and a Fellow of the Institute for Turnaround.
David Cicurel - Non-Executive Director
David is CEO of Judges Scientific plc, an AIM quoted scientific instrument company. Having spent much of his working life as a turnaround specialist, he has been responsible for a number of corporate recovery exercises including two UK public companies, International Media Communications plc (later Continental Foods) and ICD where he orchestrated the recovery of the company and helped groom it for sale. As Chairman of ICD from 1992 to 1995 he gained exposure to the Group's management team and business environment, and joined the Board in 2004.
Martin Kiersnowski - Executive Director
Martin was one of the original founders of Interactive Prospect Targeting in 2000 and has since then continued to work for the Group. He is currently Director and Chief Operating Officer of Direct Excellence Limited, the principal UK subsidiary, and President of Directinet and Netcollections. Martin has concentrated in recent years on the Group's French subsidiaries and has been working on a part-time basis; joining the Board on 17 April 2009.
Company Secretary
Martin Purvis
Martin is an experienced company secretary and director of legal and corporate services who has performed these roles in a number of listed companies and turnaround situations. He has been a consultant to the Group since October 2008 and took up the position of Company Secretary from 17 April 2009. He is a Fellow of the Institute of Chartered Secretaries and Administrators and a Member of the Institute for Turnaround.
Senior Managers
Philippe Chouvou
Philippe joined the Group on 16th February 2009 as the new Chief Executive of Directinet. He has thirty years of experience in the market research sector with major international companies such as Nielsen, IRI and NPD, and he has a deep understanding of the business and client base.
Pascal Magne
Pascal joined the Group as Finance Director of Direct Excellence France on 9th February 2009. He has a successful track record in the finance and accounting function in a number of multinational companies.
Yoann Denée
Yoann joined Netcollections as a Director in April 2007 in order to oversee the launch of French versions of two key online marketing products which enjoyed great success for the Group in the UK: the data collection site Butinéo and the competitor email library EmailTracker. For seven years before joining Netcollections, he held Internet and senior ebusiness project manager positions for the SFR mobile network.
Directors' report
Year to 31 December 2008
The Directors present their annual report and the audited financial statements for the year ended 31 December 2008.
The Company changed its accounting reference date from 31 December to 30 december (on 29 July 2009) and then (on 27 October 2009) to 29 December though, as permitted by the Section 390 Companies Act 2006, accounts for this year have been made up to 31 December 2008.
Principal activity and business review
The principal activity of the Group is the provision of permission-based online direct marketing services in France - led by its email and data marketing offering.
An extended Business review is presented on pages 8 to 9, which provides a commentary on the business including a description of the principal risks and uncertainties facing the Group, and reports on its development throughout the year and its prospects at the end of the year. A commentary on the business is also given in the Chairman's statement and the Business review.
Results and dividends
In 2008, the Group's loss after taxation was £41.3m (2007: £1.7m loss).
The Directors do not recommend the payment of a dividend (2007: £nil).
Directors and their interests
The Board comprised the following directors who served throughout the year and up to the date of this report save where disclosed beside their name:
| Nicholas Ward | Executive Chairman, appointed 19 June 2008 |
| David Cicurel | Non-Executive Director, Chairman of Audit committee and, since 17 April 2009, Chairman of the Remuneration committee |
| Barton L. Faber | Non-Executive Director and Chairman of Remuneration Committee, resigned 17 April 2009 |
| Martin Kiersnowski | appointed 17 April 2009 |
| Stephane Zittoun | appointed 4 June 2008; ceased 11 February 2009 |
| Colin Lloyd | resigned 19 June 2008 |
| Lionel Thain | resigned 29 September 2008 |
| Eoin Ryan | resigned 29 September 2008 |
| Jèrôme Stioui | resigned 4 June 2008 |
Current Directors' biographical details can be found in the Directors and senior managers section on page 10.
Directors are subject to re-election by shareholders at the Annual General Meeting after their appointment and by rotation one third of the rest of the Board each year. Those retiring and offering themselves for re-election at this year's Annual General Meeting are Martin Kiersnowski having been appointed since the previous Annual General Meeting and David Cicurel who retires by rotation.
The Directors' interests in the share capital of the Company are shown in the Remuneration Report on page 19. No director had a beneficial interest in any subsidiary undertaking.
The Company has made qualifying third party indemnity provisions for the benefit of the Directors in the form of Directors' and Officers' Liability insurance during the year which remain in force at the date of this report.
Donations
The Group did not make any political or charitable donations during the year (2007: £nil).
Creditors' payment policy
The Group's policy is to abide by the terms of payment agreed with its suppliers. At 31 December 2008, the number of supplier days outstanding, based on the average monthly outstanding Group creditor balances, was 55 days (2007: 49 days).
Acquisition of the Company's own shares
The Company has not purchased any of its own shares through the year.
At the end of the year the Directors had authority, under shareholders' resolution of 26 June 2008, to purchase through the market 2,514,612 of the Company's ordinary shares at 10p per share; this authority expiring 27 November 2009.
Employee consultation
The Group places considerable value on the involvement of its employees and has continued to keep them informed on matters affecting them as employees and on various factors affecting the performance of the Group. This is achieved through formal and informal meetings. Equal opportunity is given to all employees regardless of their sex, age, colour, race, religion or ethnic origin.
Disabled employees
The Group is committed to ensuring that people with disabilities are supported and encouraged to apply for employment and to achieve progress through the Group. They are treated so that they have an equal opportunity, so far as is justifiable, to be selected, trained and promoted. Every reasonable effort will be made to enable people with disabilities to be retained in the employment of the Group.
Annual general meeting
As a result of the change in accounting reference date, the date by which the general meeting to receive the annual report and the audited financial statements for the year to 31 December 2008 has to be held has been extended. The 2009 Annual General Meeting will now take place on 14 January 2010 in London.
The business to be transacted at the Annual General Meeting will be:
• To receive, consider and adopt the financial statements for the year to 31 December 2008 together with the Report of the Directors and the Independent Auditor's Report to the Members.
• To re-elect as Directors Martin Kiersnowski (who retires having been appointed since the previous AGM) and David Cicurel (who retires by rotation).
• To re-appoint Deloitte & Touche LLP as Auditors.
• To consider pursuant to Section 656 of the Companies Act 2006 whether any, and if so what, steps should be taken as a result of the Company's net assets amounting to less than half of the amount of its called-up share capital.
• To change the name of the Company to "Directex Realisations plc" pursuant to a commitment in connection with the sale of the UK Customer Acquisition and List Rental business.
• To approve the Company's de-listing from the Alternative Investment Market.
The Board does not propose to seek renewal of the authorities either to issue new shares or to purchase shares in the market.
Substantial shareholdings
As at 14 December 2009, the Company had been notified in accordance with chapter 5 of the Disclosure and Transparency Rules or made enquiries which revealed that the following were interested in 3% or more of the Company's share capital:
| Ordinary | Issued share | |
| Shareholder | shares | capital % |
| Fortelus Capital Management LLP | 8,613,987 | 17.05% |
| Lionel Thain | 5,740,280 | 11.36% |
| Charles Stanley | 4,496,236 | 8.90% |
| GLG Partners | 3,937,010 | 8.79% |
| RBC Dexia Investor Services Bank SA | 3,622,939 | 7.17% |
| Martin Kiersnowski | 2,482,982 | 4.92% |
| Stephane Zittoun - Amoleen Invest SA | 2,158,845 | 4.37% |
| Barclays Wealth | 1,966,641 | 3.89% |
Share Warrants
Barclays Bank plc holds share warrants provided over a maximum of 3,000,000 ordinary shares. If exercised Barclays would hold 5.6% of the increased issued share capital.
Sale of NP6
On 16 April 2009 NP6, including its subsidiary MailPerformance UK Limited, was sold to Lerinardh SAS a private equity backed vehicle of the previous management. Lerinardh paid the Group £2.9m in cash and has undertaken to pay 50% of any supplementary capital gain if within six months it sells all or part of its shares in NP6. The settlement removed all claims that the vendors may have against the Group, enabling the release of a provision for £2.4m made in the Group accounts for the 2008 earn out in relation to the original acquisition in 2007.
Sale of Directinet and Netcollections
On 11 December 2009 the Group reached agreement with Bisnode AB for the sale of Directinet and Netcollections, subject to a number of conditions including shareholders' consent, which if approved by shareholders at the Extraordinary General Meeeting on 4 January 2010 is expected to complete on or about 6 January 2010.
The amount receivable by the Group in respect of this sale comprises:
• An "Initial Consideration" of €7,000,000; and
• A "Balance Consideration" of €350,000
subject to adjustments to take in account the "Actual Net Cash Amount" and the "Adjusted Working Capital Amount" of Directinet and Netcollections on 31 December 2009 as defined in the Sale and Purchase Agreement ("Adjustments").
The Initial Consideration is payable on completion of the sale which is expected on or about 6 January 2010. The Balance Consideration (subject to the Adjustments) is payable following (i) the production of the accounts of Directinet and Netcollections for the year ended 31 December 2009 (by no later than 31 March 2010); and (ii) agreement on the extent of the Adjustments derived from those accounts. The Adjustments will vary on a day to day basis depending upon the cash flow and trading performance of Directinet and Netcollections.
The Sale and Purchase Agreement also provides for the possibility of an "Additional Consideration" of up to €1,000,000 linked to the operating performance of Directinet and Netcollections in 2009, but, based on the latest forecast of the current profitability of these companies, this is not expected to realise any further cash amounts.
In addition to the sale proceeds, the Group expects to receive settlement of amounts due by Directinet and Netcollections, amounting at the end of November 2009, to approximately €480,000. It is currently expected that the majority of this will be paid before completion with any balance paid by 31 March 2010.
The Group has given a number of warranties, but the Group's liability under them is capped at €100,000.
Vincent Square
On 11 December 2009 the Company agreed terms with the landlord of the Group's head offices at Vincent Square under which the Group has acquired an option to assign the Vincent Square leases to the landlord's ultimate parent company shortly after the completion of the proposed sale of Directinet and Netcollections, thereby extinguishing all the Group's obligations under those leases.
The net cost of these assignments will be approximately £1,000,000 which will be satisfied out of the sale proceeds of Directinet and Netcollections. The Board has been advised that this is a good outcome for the Group and that the potential liability could have been significantly higher.
Going concern
As a result of significant UK losses in the first half of 2008 and restrictions on the use of funds from the French businesses, the Group postponed the capital repayments, first due in July 2008, on the loan taken out in June 2007 to support the acquisition of NP6. The Group was, at the time, in breach of certain conditions and covenants under this loan.
As disclosed to the market, the Group held discussions with its Bank to obtain a waiver of these breaches and to agree amendments to the terms of the Bank's facilities. As part of the Group's disposal of its Core UK Business the Bank agreed to amend the covenant and payment terms of the loan facility with the Group including the formal waiver of all current breaches of the loan facility.
Following the restructure of the loan facility, the Group continued to discuss with the Bank the fulfilment of certain conditions set out in a restructuring letter dated 24 October 2008. Such conditions were due to be fulfilled by 15 December 2008. On 29 December 2008 the Group received from the Bank a formal notification that the Group was in default under the terms of the restructuring letter. In the notification, the Bank also confirmed that it had no current intention of enforcing its rights or taking any immediate action in respect of the breaches under the terms of the restructuring letter, however it has reserved its rights to do so. The Bank's indebtedness remains in default and the Board is actively working to repay the full amount of the remaining debt as quickly as possible.
The financial statements have been prepared on a going concern basis. The Directors continue to be of the view that it is appropriate to prepare the financial statements on this basis. In forming this view the Directors have conducted a review of the trading prospects of the Group, including a cash flow forecast which considers the Group's funding requirements to the end of December 2010, and the prospect of completing the sale of the Group's French businesses.
However, the ability of the Group to continue as a going concern depends upon three key issues:
• The approval by shareholders of the proposed sale of Directinet and Netcollections, and the subsequent completion of the Sale and Purchase Agreement following satisfaction of the other conditions precedent.
• The continued support of Barclays Bank until completion and the repayment of their debt at completion.
• The surrender of the Vincent Square leases on the basis negotiated with the landlord, settlement of which will be made from the proceeds of sale of Directinet and Netcollections.
There is a risk that the sale of the French businesses may not be completed successfully and the Bank may withdraw support, and this constitutes a material uncertainty as to the Group's ability to continue as a going concern. The financial statements do not include any adjustments that would result if the Group were unable to continue as a going concern, which would include writing down the carrying value of assets to their recoverable amount, and providing for any further liabilities that might arise, as it is not practicable to determine or quantify them.
Section 656 Companies Acts 2006
The Companies Act provides that where the net assets of a company amount to half or less of the amount of its called-up share capital, the directors are obliged within 28 days of discovering the fact to convene a general meeting for the purpose of considering whether any, and if so what, measures should be taken to deal with the situation.
The Balance sheet of the Company as at 31 December 2008 shows negative net assets of £67,217, which is less than half the share capital of the Company of £202,075.
The net assets of the Company reflect the value of its interest in its wholly owed subsidiary, Direct Excellence Limited, which in turn reflects the underlying carrying value at 31 December 2008 of its interest in Directinet and Netcollections.
The Section 656 shortfall came to light when the 2008 accounts were finalised following signature of the conditional agreement for the sale of Directinet and Netcollections on 11 December 2009.
The Board believes that the issue of the Section 656 shortfall has been addressed by the sale of Directinet and Netcollections and does not propose taking any further action.
Auditors
Each of the persons who is a Director at the date of approval of this report confirms that:
• so far as the Director is aware, there is no relevant audit information of which the Company's auditors are unaware; and
• the Director has taken all the steps that they ought to have taken as a director in order to make themself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of s234ZA of the Companies Act 1985.
Deloitte LLP have expressed their willingness to continue in office as auditors and a resolution for their re-appointment will be proposed at the forthcoming Annual General Meeting.
Approved by the Board of Directors on 17 December 2009 and signed on behalf of the Board
Martin Purvis
Secretary
Corporate governance report
Year to 31 December 2008
Statement of directors' responsibilities
The Directors are responsible for preparing the Annual Report, Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. The directors are required by the IAS Regulation to prepare the Group financial statements in accordance with International Financial Reporting Standards ("IFRS") (including International Accounting Standards "IAS" and interpretations issued by the International Accounting Standards Board ("IASB") and its committees, and as interpreted by any regulatory bodies applicable to the Group as adopted for use in the European Union). The Group financial statements are also required by law to be properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation.
International Accounting Standard 1 requires fair presentation of the Group's financial position, financial performance and cash flows for each financial year. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board's 'Framework for the Preparation and Presentation of Financial Statements'. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRSs. Directors are also required to:
• properly select and apply accounting policies;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; and
• provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance.
The Directors have elected to prepare the parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The Parent Company financial statements are required by law to give a true and fair view of the state of affairs of the Company. In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the parent Company financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Compliance with the combined code
The Combined Code on Corporate Governance that was issued in 2006 by the Financial Reporting Council ("The Code") is not mandatory for companies listed on the Alternative Investment Market of the London Stock Exchange.
The Board nevertheless recognises the importance of the principles of good corporate governance and is committed to applying the principles of the Combined Code where they are appropriate given the Company's size. The following provide information on how these principles have been applied, but it does not constitute compliance with the Combined Code.
Board of directors
Following the resignation of Lionel Thain and Eoin Ryan with the sale of the Core UK Business in September 2008, the departure from the board of Stephane Zittoun in February 2009 and Barton Faber's resignation becoming effective on 17 April 2009, the Board now comprises Nicholas Ward (Executive Chairman), Martin Kiersnowski (Chief Operating Officer, Direct Excellence Limited) and David Cicurel (independent non-executive director).
The Board considers that, notwithstanding any interests in the shares and share options of the Company as set out in the Remuneration Report on pages 18 to 20, the non-executive Directors who served during the year were independent of the management of the Group and were free from any business or other relationship that could materially interfere with the exercise of their independent judgement. The non-executive Directors were paid a fixed fee or reimbursed expenses and not dependent on the Company for his primary source of income nor paid by the Company in any capacity other than as a non-executive Director. In addition, an independent Director will not have previously been a Senior Manager of the Company and will not have participated in the Company's incentive bonus schemes.
The Board meets regularly, reviewing trading performance, ensuring adequate funding and compliance with banking covenants, setting and monitoring strategy, examining acquisition/disposal possibilities and, when appropriate, reporting to shareholders. To enable the Board to discharge its duties, efforts are made to ensure all Directors receive appropriate and timely information.
The Directors are able to take independent professional advice as required, paid for by the Company.
The following committees deal with specific aspects of the Group's affairs. Their terms of reference are published on the Company's website:
Audit committee
The Audit Committee has been chaired by David Cicurel and consisted of both the non-executive directors, until Barton Faber resigned on 17 April 2009. The Audit Committee is responsible for reviewing, on behalf of the Board, the Group's accounting and financial reporting practices and disclosures, its internal controls, the work of the external auditors and Group compliance with financial policies, regulations and laws. The Committee is also responsible for reviewing the scope and results of the audit and the fees of the auditors. Prior to awarding any non-audit services to the auditors, the Committee considers the implications with regards to their objectivity and independence. The Committee is authorised to seek information from any member of the Group and to obtain external professional advice if it considers it necessary. The Committee meets half-yearly to review the annual and half-yearly financial reports through a process involving discussion with the Executive Directors and finance staff and the external auditors prior to their submission to the Board. In addition the Committee reviews the effectiveness of the system of internal financial control by reviewing the adequacy of control and monitoring procedures in relation to each of the key risks identified in the business.
Remuneration committee
The Remuneration Committee consisted of both the non-executive directors, chaired by Barton Faber until his resignation on 17 April 2009 when David Cicurel replaced him. The Remuneration Committee meets periodically as required. The role of the Committee is to approve the terms of service, agree the remuneration and to determine the allocation of share options to the executive directors within the terms of the remuneration policy, which is approved annually by the Board.
Further details of the Company's policies on remuneration, service contracts and share options are given in the Remuneration Report on pages 18 to 20.
Internal controls
The Directors are responsible for the Group's system of internal control and reviewing its effectiveness. Such a system is designed to manage, rather than eliminate, the risk of failure to achieve business objectives, and can only provide reasonable, and not absolute, assurance against material misstatement or loss. The active involvement of the executive directors in the Group's management groups and committees allows the Board to continually monitor and assess significant business, operational, financial, compliance and other risks, and to review the effectiveness of internal control. The Group has a budgetary process in which the key risks faced by the Group are identified. Performance is monitored and relevant action taken through the monthly reporting to the Board of variances from the budget, updated forecasts for the period together with information on the key risk areas. Capital expenditure is regulated by the budgetary process and authorisation levels.
Responsibility levels are communicated throughout the Group including delegation of authority and authorisation levels, segregation of duties and other control procedures.
The Audit Committee monitors controls which are in force and any perceived gaps in the control environment, and also considers and determines relevant action in respect of any control issues raised by the external auditors.
The Board has considered the need for an internal audit function and concluded that it would not be appropriate given the size of the organisation.
Relations with shareholders
The Company encourages the participation of both institutional and private investors. Presentations to institutional investors are held regularly and communication with private individuals and institutional investors is maintained through the Annual General Meeting and the Company's website.
Approved by the Board of Directors on 17 December 2009 and signed on behalf of the Board
Martin PurvisCompany Secretary
Remuneration report
Year to 31 December 2008
Part 1 - UNAUDITED INFORMATION
Membership
The Remuneration Committee consisted of Barton Faber and David Cicurel, independent non-executive directors.
None of the Committee had any personal financial interest (other than as a shareholder), conflicts of interests arising from cross-directorships or day-to-day involvement in running the business. The Committee makes recommendations to the board. No director plays a part in any discussion about his own remuneration.
Remuneration Policy
The Group's policy on remuneration is to attract, retain and incentivise the best staff in a manner consistent with the goals of corporate governance. In setting the Group's remuneration policy, the Remuneration Committee considers a number of factors including the basic salaries and benefits available to executive directors of comparable companies.
Consistent with this policy, the Company's remuneration packages awarded to executive directors are intended to be competitive and comprise a mix of performance-related and non-performance-related elements. The Group operated discretionary bonus schemes, subject to the achievement of agreed goals and targets, for executive directors designed to incentivise them to perform at the highest levels and to align their interests with those of the shareholders.
Fees paid to non-executive directors are determined by the Board. Non-executive directors do not receive a bonus or participate in the Group's share option schemes. However, certain share options granted to some non-executive directors in previous years are still outstanding; details of these are given on page 19.
Directors' service agreements
Executives who have held positions in Group companies and have been directors, are or have been employed under the terms of written service agreements which set out their responsibilities and obligations to the Group and the terms of their employment. Such service agreements are terminable on 12 months' written notice from either party and include garden leave and pay in lieu of notice provisions. Stephane Zittoun was Président Directeur Général (PDG) of NP6 and did not have a written service contract with the Company. Mertin Kiersnowski's contract provides for him becoming a non-executive director after a sale of the Group's French subsidiaries until 31 March 2010.
The non-executive directors (including Colin Lloyd whilst he was non-executive chairman) are employed under the terms of letters of appointment terminable on not less than 3 months' written notice by either party and their remuneration is determined by the Board.
Nicholas Ward, who has been executive chairman since 19 June 2008, is employed under the terms of letters of appointment terminable on not less than 3 months, his remuneration is determined by the remuneration committee.
Nicholas Ward receives an annual fee of £90,000. In October 2008 he received a payment of £100,000 and in April 2009 he was paid a further sum of £100,000 in recognition of the additional services he provided to the Company. He is entitled to a further payment of £100,000 in the event of dividends or other capital or revenue distributions or similar becoming due to shareholders as a result of the sale or other disposal of all of the Company's French subsidiaries outside of the Group or as a result of a change of control of the Company ("Contingent Payment") and to an amount equal to 5% of any and all dividends or other capital or revenue distributions or proceeds of sale received by shareholders ("Percentage Payment"). The Contingent Payment and the Percentage Payment are dependent on him remaining a director, employee or consultant to a member of the Group during various time frames.
Under the terms of his appointment, Nicholas Ward has a commitment from the Company that he will be invited to apply for up to 1,000,000 options in the Group's Unapproved Share Option Scheme, in tranches of 200,000 options at a subscription price of 30p per share (the price on the date he took office) if the share price of the Group reaches 40p, 50p, 60p, 70p and 80p. He receives no other benefits.
The main elements of the other executive directors' remuneration package were as follows:
Basic salary
This has been determined by the Remuneration Committee by taking into account the position and performance of the individual, together with the performance of the Group.
Performance-Related Bonuses
The performance measures principally relate to the profitability of the Company. There are no bonus awards due for 2008.
Pensions
The Group does not operate any pension plans available to Directors.
Share options
The executive directors were entitled to participate in the Company's share option schemes, options being granted at the discretion of the Committee on the premise that the continued grant of share options would motivate the executive directors to increase shareholder returns in the medium to long term.
Part 2 - AUDITED INFORMATION
Directors' remuneration
The Directors received the following remuneration during the year:
| Salary | Annual | Termination | Total | Total | |||
| and fees | bonus | Payment | 2008 | 2007 | |||
| Appointed | Resigned | £'000 | £'000 | £'000 | £'000 | ||
| Executive | |||||||
| Nicholas Ward | 19/06/2008 | 148 | - | - | 148 | - | |
| Stephane Zittoun | 04/06/2008 | 11/02/2009 | 55 | - | - | 55 | - |
| Eoin Ryan | 29/09/2008 | 100 | - | - | 100 | 130 | |
| Lionel Thain | 29/09/2008 | 149 | - | - | 149 | 198 | |
| Jérôme Stioui | 04/06/2008 | 110 | 128 | 195 | 433 | 116 | |
| Non-executive | |||||||
| Colin Lloyd | 19/06/2008 | 28 | - | 8 | 36 | 40 | |
| David Cicurel | 30 | - | - | 30 | 125 | ||
| Barton Faber | 17/04/2009 | - | - | - | - | - | |
| Total | 620 | 128 | 203 | 951 | 609 |
The above figures are exclusive of social security charges.
Barton Faber drew no remuneration throughout the year nor in 2009. The Board awarded him an ex-gratia payment of £25,000 in May 2009 after he had left the Company.
Directors' share options
Details of the options granted to or held by the Directors are as follows:
| At | At | ||||||
| 01-Jan | 31-Dec | ||||||
| 2008 | 2008 | ||||||
| or date of | or date of | Earliest | |||||
| appointment | Options | Options | cessation if | Exercise | date | Date of | |
| if later | granted | lapsed | earlier | price | of exercise | expiry | |
| Executive | |||||||
| Stephane Zittoun | - | 50,000 | - | 50,000 | 24.00p | 27/05/2011 | 27/05/2018 |
| Nicholas Ward | - | - | - | - | - | - | - |
| Eoin Ryan | 70,245 | - | (70,245) | - | - | - | - |
| Eoin Ryan | 20,000 | - | (20,000) | - | - | - | - |
| Lionel Thain | 50,000 | - | (50,000) | - | - | - | - |
| Eoin Ryan | 12,500 | - | (12,500) | - | - | - | - |
| Lionel Thain | 50,000 | - | (50,000) | - | - | - | - |
| Eoin Ryan | 37,500 | - | (37,500) | - | - | - | - |
| Jérôme Stioui | 25,000 | - | (25,000) | - | - | - | - |
| Jérôme Stioui | 110,000 | - | (110,000) | - | - | - | - |
| Jérôme Stioui | - | 7,500 | (7,500) | - | - | - | - |
| Non-executive | |||||||
| David Cicurel | 30,000 | - | - | 30,000 | 191.00p | 27/09/2007 | 04/09/2010 |
| Colin Lloyd | 220,500 | - | (220,500) | - | - | - | - |
Options are exercisable 25% from the exercisable date, and 25% and 50% from the first and second anniversary of the exercisable date.
Colin Lloyd's options lapsed 19 December 2008 - in accordance with the Scheme rules, six months after he ceased to be a director.
Lionel Thain's and Eoin Ryan's options were relinquished on 29 September 2008 when they ceased to be directors.
Jérôme Stioui's options were relinquished 5 November 2008.
Stephane Zittoun's options expired 15 October 2009 - in accordance with the Scheme rules, six months after the sale of NP6.
No Director exercised any share options giving rise to a gain during the year.
The market price of the ordinary shares as at 31 December 2008 was £0.025 and the range during the year was £0.025 to £1.02.
Directors' interests in shares
The Directors who held office at 31 December 2008 had the following interests in the shares of the Company:
| 2008 | 2007 | |
| Number | Number | |
| David Cicurel | 140,500 | 140,500 |
| Barton Faber | 320,000 | 320,000 |
| Stephane Zittoun | 2,158,845 | - |
Approved by the Board of Directors on 17 December 2009 and signed on behalf of the Board
David Cicurel
Chairman of the Remuneration Committee
Independent auditors' report to the members of Interactive Prospect Targeting Holdings plc
We have audited the Group financial statements of Interactive Prospect Targeting Holdings plc for the year ended 31 December 2008 which comprise the consolidated income statement, the consolidated statement of recognised income and expense, the consolidated balance sheet, the consolidated cash flow statement and the related notes 1 to 33. These Group financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the Directors' Remuneration Report that is described as having been audited.
We have reported separately on the parent Company financial statements of Interactive Prospect Targeting Holdings plc for the year ended. That report is modified by the inclusion of an emphasis of matter. The opinion in that report is unqualified.
This report is made solely to the Company's members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The Directors' responsibilities for preparing the Annual Report, the Directors' Remuneration Report and the Group financial statements in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union are set out in the Statement of Directors' Responsibilities.
Our responsibility is to audit the Group financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the Group financial statements give a true and fair view, whether the Group financial statements and the part of the Directors' Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information given in the Directors' Report is consistent with the Group financial statements. The information given in the Directors' Report includes that specific information presented in the Business Review that is cross referred from the Principal Activity and Business Review section of the Directors' Report.
In addition we report to you if, in our opinion, we have not received all the information and explanations we require for our audit, or if information specified by law regarding director's remuneration and other transactions is not disclosed.
We read the other information contained in the Annual Report as described in the contents section and consider whether it is consistent with the audited Group financial statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the Group financial statements. Our responsibilities do not extend to any further information outside the Annual Report.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the group financial statements and the part of the Directors' Remuneration Report to be audited. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the group financial statements, and of whether the accounting policies are appropriate to the group's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the group financial statements and the part of the Directors' Remuneration Report to be audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the group financial statements and the part of the Directors' Remuneration Report to be audited.
Opinion
In our opinion:
• the group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the group's affairs as at 31 December 2008 and of its loss for the year then ended;
• the group financial statements have been properly prepared in accordance with the Companies Act 1985;
• the part of the directors' remuneration report described as having been audited has been properly prepared in accordance with the Companies Act 1985; and
• the information given in the Directors' Report is consistent with the group financial statements.
Emphasis of matter - going concern
Without qualifying our opinion, we draw attention to the disclosures made in note 3 of the financial statements concerning the concerning the Group's ability to continue as a going concern.
The ability of the Group to continue as a going concern is contingent upon the successful resolution of the following:
• The approval by the shareholders of the proposed sale of Directinet and Netcollections, and the subsequent completion of the Sale and Purchase Agreement following satisfaction of other conditions precedent.
• The continued support of Barclays Bank until completion and the repayment of their debt at completion.
• The surrender of the Vincent Square leases on the basis negotiated with the landlord, settlement of which will be made from the proceeds of the sale of Directinet and Netcollections.
These conditions, along with other matters as set forth in note 3, indicate the existence of a material uncertainty which may cast doubt over the Group's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the company was unable to continue as a going concern.
Deloitte LLPChartered Accountants and Registered Auditors Reading, United Kingdom
17 December 2009
Consolidated income statement
Year to 31 December 2008
| Notes | 2008 | 2007 | |
| £'000 | £'000 | ||
| Continuing operations | |||
| Revenue | 5 | 22,327 | 15,809 |
| Cost of sales | (6,916) | (5,672) | |
| Gross profit | 15,411 | 10,137 | |
| Administrative expenses | |||
| Share-based payment charge | (256) | (145) | |
| Amortisation of acquisition related intangible assets | 16 | (420) | (361) |
| Restructuring costs | (4,498) | - | |
| Goodwill impairment charges | (27,485) | - | |
| Other administrative expenses | (12,269) | (9,636) | |
| (44,928) | (10,142) | ||
| Operating loss | (29,517) | (5) | |
| Investment revenue | 5 | 76 | 142 |
| Finance costs | 11 | ||
| - Interest on bank overdraft and loans | (429) | (145) | |
| - Foreign exchange loss on loan payable | (379) | (439) | |
| - | |||
| Unwinding of discount and foreign exchange on deferred consideration | |||
| payable | (1,330) | (1,151) | |
| - Restructuring fee | (515) | - | |
| Loss before tax | (32,094) | (1,598) | |
| Tax | 12 | (793) | (796) |
| Loss for the year from continuing operations | 7 | (32,887) | (2,394) |
| Discontinued operations | |||
| (Loss)/profit for the year from discontinued operations | 13 | (8,442) | 733 |
| Loss for the period | (41,329) | (1,661) | |
| Loss attributable to equity holders of the parent | 27 | (41,329) | (1,661) |
| Loss per share | 14 | ||
| From continuing operations | |||
| Basic (pence) | (67.3) | (5.4) | |
| From continuing and discontinued operations | |||
| Basic (pence) | (84.6) | (3.7) |
Consolidated statement of recognized income and expenses
Year to 31 December 2008
| Notes | 2008 | 2007 | |
| £'000 | £'000 | ||
| Tax taken directly to equity - current tax | - | 43 | |
| Tax taken directly to equity - deferred tax | 24 | (195) | (153) |
| Exchange differences on translation of foreign operations | 7,920 | 2,307 | |
| Net income recognised directly in equity | 7,725 | 2,197 | |
| Loss for the period | 27 | (41,329) | (1,661) |
| Total recognised income and expense for the year | (33,604) | 536 | |
| Prior year amendment - deferred consideration | - | (400) | |
| Total recognised income and expense since last report | (33,604) | 136 | |
| The total recognised income and expense in the year is attributable to: | |||
| Equity holders of the parent | (33,604) | 536 |
Consolidated balance sheet
At 31 December 2008
| Notes | 2008 | 2007 | |
| £'000 | £'000 | ||
| Non-current assets | |||
| Goodwill | 15 | 6,612 | 31,006 |
| Other intangible assets | 16 | 2,797 | 5,951 |
| Property, plant and equipment | 17 | 241 | 949 |
| Deferred tax asset | 24 | - | 679 |
| 9,650 | 38,585 | ||
| Current assets | |||
| Trade and other receivables | 19 | 10,194 | 14,041 |
| Cash and cash equivalents | 19 | 3,704 | 4,710 |
| Current tax assets | 572 | 157 | |
| 14,470 | 18,908 | ||
| Total assets | 24,120 | 57,493 | |
| Current liabilities | |||
| Trade and other payables | 21 | (9,381) | (9,467) |
| Provisions | 22 | (526) | - |
| Current tax liabilities | (37) | (440) | |
| Bank loans and overdrafts | 20 | (6,961) | (800) |
| Deferred consideration payable | (2,489) | (4,254) | |
| (19,394) | (14,961) | ||
| Non-current liabilities | |||
| Provisions | 22 | (1,246) | - |
| Deferred tax liability | 24 | (833) | (1,223) |
| Bank loans | 20 | - | (3,997) |
| Deferred consideration payable | - | (3,546) | |
| (2,079) | (8,766) | ||
| Total liabilities | (21,473) | (23,727) | |
| Net assets | 2,647 | 33,766 | |
| Equity | |||
| Share capital | 25, 27 | 202 | 179 |
| Share premium account | 27 | 26,680 | 24,475 |
| Own shares | 26, 27 | - | (529) |
| Share option reserve | 27 | 535 | 279 |
| Other reserves | 27 | 2,372 | 2,372 |
| Retained earnings | 27 | (27,142) | 6,990 |
| Total equity | 27 | 2,647 | 33,766 |
These financial statements were approved by the Board of Directors on 17 December 2009
Signed on behalf of the Board by:
Nicholas WardChairman
Consolidated cash flow statement
Year to 31 December 2008
| Notes | 2008 | 2007 | |
| £'000 | £'000 | ||
| Net cash from operating activities | 29 | 1,745 | 588 |
| Investing activities | |||
| Interest received | 76 | 142 | |
| Proceeds on disposal of property, plant and equipment | 2 | 21 | |
| Purchases of property, plant and equipment | 17 | (419) | (602) |
| Purchases of intangible fixed assets | 16 | (850) | (1,464) |
| Disposal/(acquisition) of subsidiaries | 28 | 1,328 | (4,566) |
| Deferred consideration paid in relation to prior year acquisitions | (3,212) | (1,033) | |
| Net cash used in investing activities | (3,075) | (7,502) | |
| Financing activities | |||
| Interest paid | 11 | (429) | (145) |
| Purchase of own shares | - | (294) | |
| New bank loans | (3) | 4,357 | |
| Net cash from financing activities | (432) | 3,918 | |
| Net decrease in cash and cash equivalents | (1,762) | (2,996) | |
| Cash and cash equivalents at the beginning of the period | 4,710 | 7,454 | |
| Effect of foreign exchange rate changes | 756 | 252 | |
| Cash and cash equivalents at the end of the period | 3,704 | 4,710 |
Notes to the consolidated financial statements
Year to December 2008
1. General information
Interactive Prospect Targeting Holdings plc is a company incorporated in the United Kingdom under the Companies Act 1985. The nature of the Group's operations and its principal activities are set out in the Directors' Report on page 11.
2. Adoption of new and revised Standards
In the current year, two interpretations issued by the International Financial reporting Interpretations Committee are effective for the current period:
IFRIC 11 IFRS 2 - Group and Treasury Share Transactions
The adoption of these Interpretations has not led to any changes in the Group's accounting policies.
At the date of authorisation of these financial statements the following new standards and interpretations which have not been applied in these financial statements were in issue but have not yet come into effect (and in some cases had not yet been adopted by the EU:
IFRS 1 (amended) / IAS 27 (amended) Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
IFRS 2 (amended) Share-based Payment - Vesting Conditions and Cancellations
IFRS 3 (revised 2008) Business Combinations
IFRS 8 Operating Segments
IAS 1 (revised 2007) Presentation of Financial Statements
IAS 23 (revised 2007) Borrowing Costs
IAS 27 (revised 2008) Consolidated and separate Financial Statements
IAS 32 (amended) / IAS 1 (amended) Puttable Financial Instruments and Obligations Arising on Liquidation
IFRIC 12 Service concession arrangements
IFRIC 16 Hedges of a Net Investment in a Foreign Operation
IFRIC 17 Distributions of Non-cash Assets to Owners
IFRIC 18 Transfers of Assets from Customers
The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group except for additional segment disclosures when IFRS 8 comes into effect for periods commencing on or after 1 January 2009.
3. Accounting policies
The principal accounting policies adopted are set out below.
Basis of accounting
The financial statements have been prepared in on the historic cost basis and in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the European Union and therefore comply with Article 4 of the EU IAS Regulation.
Going concern
As a result of significant UK losses in the first half of 2008 and contractual restrictions on the use of funds from the French businesses (which are profit-making), the Group postponed the capital loan repayments, first due in July 2008, on the loan taken out in June 2007 to support the acquisition of NP6. The Group was in breach of certain conditions and covenants under this loan.
As disclosed in its announcement to the market on 11 August 2008, the Group held discussions with its Bank to obtain a waiver of these breaches and to agree amendments to the terms of the Bank's facilities. As disclosed in its announcement to the market on 29 September 2008, the Group has disposed of its UK Customer Acquisition and List Rental businesses. As part of this sale process, the Bank agreed, following the above mentioned sale, to amend the covenant and payment terms of the loan facility with the Group including the formal waiver of all current breaches in the loan facility.
Following the restructure of the loan facility, the Group continued to discuss with the Bank the fulfilment of certain conditions set out in a restructuring letter dated 24 October 2008. Such conditions were due to be fulfilled by 15 December 2008. On 30 December 2008 the Group received from the Bank a formal notification that the Group was in default under the terms of the restructuring letter. In the notification, the Bank also confirmed that it had no current intention of enforcing its rights or taking any immediate action in respect of the breaches under the terms of the restructuring letter, however it has reserved its rights to do so. The Bank's indebtedness remains in default and the Board is actively working to repay the full amount of the remaining debt as quickly as possible.
In accordance with IAS 1, the total borrowings have been classified as current liability in the balance sheet as at 31 December 2008.
The financial statements have been prepared on a going concern basis. The Directors continue to be of the view that it is appropriate to prepare the financial statements on this basis. In forming this view, the Directors have conducted a review of the trading prospects of the Group, including a cash flow forecast which considers the Group's funding requirements to the end of December 2010, and the prospect of completing the sale of the Group's French businesses.
However, the ability of the Group to continue as a going concern depends upon three key issues:
• The approval by shareholders of the proposed sale of Directinet and Netcollections, and the subsequent completion of the Sale and Purchase Agreement following satisfaction of the other conditions precedent.
• The continued support of Barclays Bank until completion and the repayment of their debt at completion.
• The surrender of the Vincent Square leases on the basis negotiated with the landlord, settlement of which will be made from the proceeds of sale of Directinet and Netcollections.
There is a risk that the sale of the French businesses may not be completed successfully and the Bank may withdraw support, and this constitutes a material uncertainty as to the Group's ability to continue as a going concern. The financial statements do not include any adjustments that would result if the Group were unable to continue as a going concern, which would include writing down the carrying value of assets to their recoverable amount, and providing for any further liabilities that might arise, as it is not practicable to determine or quantify them.
Basis of consolidation
The Group's consolidated financial statements incorporate the financial statements of Interactive Prospect Targeting Holdings plc (the "Company") and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
The results of subsidiaries disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Business combinations
The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquirer, plus any costs directly attributable to the business combination. The acquirer's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for resale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group's interest in the net fair value of the acquirer's identifiable assets, liabilities and contingent liabilities exceed the cost of the business combination, the excess is recognised immediately in profit or loss.
Goodwill
Goodwill arising on consolidation represents the excess of the 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 initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill, which is recognised as an asset, is reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and is not subsequently reversed.
For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
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.
Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous United Kingdom Generally Accepted Accounting Principles ("UK GAAP") amounts subject to being tested for impairment at that date.
Acquisition related intangible assets and other intangible assets
Acquisition related intangible assets, which comprise of existing unfulfilled orders at acquisition date, non-contractual customer relationships and trade names, relate to identifiable assets that meet the conditions for recognition under IFRS 3 at the acquisition date.
Other intangible assets, which comprise of licences, computer software and data acquisition costs, are stated at cost, net of amortisation and any recognised impairment loss. Computer software is amortised over two years. Data acquisition costs comprise the external purchase costs of data used by customers for marketing purposes and are amortised over three years.
Property, plant and equipment
Property, plant and equipment are stated at cost, net of depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost or valuation of assets less residual value, over their estimated useful lives, using the straight-line method, on the following basis:
| Computer equipment | 33% on cost |
| Plant and equipment | 20% on cost |
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease.
Internally-generated intangible assets
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from the Group's website developments is recognised only if all of the following conditions are met:
• an asset is created that can be identified (such as software and new processes);
• it is probable that the asset created will generate future economic benefits; and
• the development costs of the asset can be measured reliably.
Internally-generated intangible assets are amortised on a straight-line basis over their useful lives. Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income.
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales related taxes.
Sales of goods are recognised when goods are delivered and title has passed. Revenue is recognised when the significant risks and rewards associated with ownership of the goods have been transferred. Sales of services are recognised with reference to the stage of completion.
Foreign currencies
The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in Pounds Sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.
In preparing the financial statement of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period, except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are classified as equity and transferred to the Group's translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
Operating profit
Operating profit is stated before investment income and finance costs. Adjusted operating profit is stated before inclusion of certain expenditure as noted in the reconciliation within note 9.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit 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 the 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 the initial recognition of 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 it 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 related to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and where they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
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 value 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 estimates 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 or cash-generating unit is reduced to its recoverable amount and the impairment loss is recognised as an expense immediately.
When an impairment loss subsequently reverses, the carrying amount of the asset or 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 or 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.
Trade receivables
Trade receivables do not carry any interest and are measured at their nominal value as reduced by any appropriate allowances for irrecoverable amounts.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements 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.
Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges are accounted for on an accruals basis in profit or loss using the 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.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the balance sheet date and are discounted to present value where the effect is material.
Hedges of net investments in foreign operations
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in equity in the foreign currency translation reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in the 'finance costs' line of the income statement.
Gains and losses deferred in the foreign currency translation reserve are recognised in profit or loss on disposal of the foreign operation.
Share-based payments
The Group has applied the requirements of IFRS 2 Share-based payments. In accordance with the transitional provisions, IFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested at 1 January 2005.
The Group operates a number of equity-settled share-based payment schemes under which share options are issued to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions.
Fair value is measured by use of the Black Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
4. Critical accounting judgments and key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below. The judgements used by management in the application of the Group's policies in respect of these key areas of estimation are considered to be the most significant.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which the goodwill has been allocated. The value in use calculation requires the entity to estimate future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The carrying amount of goodwill at the balance sheet date was £6.6m. Details regarding the goodwill carrying value and assumptions used in carrying out the impairment reviews are provided in note 15.
Provision for Restructuring
Provisions made represent the best estimate of obligations at the balance sheet date. The provision for onerous lease commitments has been calculated at the net present value of rents payable less expected rents receivable (having taken account of potential void periods and lease incentives) up to the break date of the lease. Allowances have also been made for empty rates and agent's fees.
5. Revenue
An analysis of the Group's revenue is as follows:
| Year to 31 December 2008 | |||
| Continuing | Discontinued | ||
| operations | operations | Total | |
| 2008 | 2008 | 2008 | |
| £'000 | £'000 | £'000 | |
| Revenue from the supply of online direct marketing products and services | 22,327 | 10,195 | 32,522 |
| Investment revenue* | 76 | - | 76 |
| Total | 22,403 | 10,195 | 32,598 |
| Year ended 31 December 2007 | |||
| Continuing | Discontinued | ||
| operations | operations | Total | |
| 2007 | 2007 | 2007 | |
| £'000 | £'000 | £'000 | |
| Revenue from the supply of online direct marketing products and services | 15,809 | 17,435 | 33,244 |
| Investment revenue* | 142 | - | 142 |
| Total | 15,951 | 17,435 | 33,386 |
*Investment revenue relates to interest on bank deposits.
6. Segmental information
Business segments
Segmental information is presented in respect of the Group's primary business segments.
Segmental results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated costs comprise mainly head office expenses.
Segmental capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and intangible assets other than goodwill and those arising on business combinations.
The Group comprises two main business segments, based on geographical location - the United Kingdom and France. These divisions are the basis on which the Group reports its primary management information.
Results - year to 31 December 2008
| Discontinued | |||||
| operations | |||||
| UK | France | (Note 13) | Unallocated | Consolidated | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
| Revenue | 11,032 | 21,490 | (10,195) | - | 22,327 |
| Adjusted EBITDA (note 9) | -11,207 | (23,892) | 6,493 | - | (28,606) |
| Share-based payment charge | - | - | - | (256) | (256) |
| Amortisation of acquisition related intangible assets | (77) | (420) | 77 | - | (420) |
| Depreciation on property, plant and equipment | (330) | (110) | 330 | - | (110) |
| Amortisation of non-acquisition related intangible assets | (775) | (125) | 775 | - | (125) |
| Operating (loss)/profit from operations | -12,389 | (24,547) | 7,675 | (256) | (29,517) |
| Investment revenue (note 5) | - | - | - | 76 | 76 |
| Finance costs (note 11) | - | - | - | (2,653) | (2,653) |
| Loss for the year before taxation | (32,094) | ||||
| Taxation | (793) | ||||
| Loss for the year from continuing operations | (32,887) |
Results - year ended 31 December 2007
| Discontinued | |||||
| operations | |||||
| UK | France | (Note 13) | Unallocated | Consolidated | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
| Revenue | 19,204 | 14,040 | (17,435) | - | 15,809 |
| Adjusted EBITDA (note 9) | 1,308 | 2,700 | (2,624) | (716)- | 668 |
| Share-based payment charge | - | - | - | (145) | (145) |
| Adjustment to goodwill on recognition of tax assets | (30) | - | - | (30) | |
| Amortisation of acquisition related intangible assets | (145) | (361) | 145 | - | (361) |
| Depreciation on property, plant and equipment | (406) | (73) | 406 | - | (73) |
| Amortisation of non-acquisition related intangible assets | (1,441) | (64) | 1,441 | - | (64) |
| Operating (loss)/profit | (714) | 2,202 | (632) | (861) | (5) |
| Investment revenue (note 5) | - | - | - | 142 | 142 |
| Finance costs (note 11) | - | - | - | (1,735) | (1,735) |
| Loss for the year before taxation | (1,598) | ||||
| Taxation | (796) | ||||
| Loss for the year from continuing operations | (2,394) |
| Results - year ended 31 December 2007 | |||||
| Discontinued | |||||
| operations | |||||
| UK | France | (Note 13) | Unallocated | Consolidated | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
| Revenue | 19,204 | 14,040 | (17,435) | - | 15,809 |
| Adjusted EBITDA (note 9) | 1,308 | 2,700 | (2,624) | (716)- | 668 |
| Share-based payment charge | - | - | - | (145) | (145) |
| Adjustment to goodwill on recognition of tax assets | (30) | - | - | (30) | |
| Amortisation of acquisition related intangible assets | (145) | (361) | 145 | - | (361) |
| Depreciation on property, plant and equipment | (406) | (73) | 406 | - | (73) |
| Amortisation of non-acquisition related intangible assets | (1,441) | (64) | 1,441 | - | (64) |
| Operating (loss)/profit | (714) | 2,202 | (632) | (861) | (5) |
| Investment revenue (note 5) | - | - | - | 142 | 142 |
| Finance costs (note 11) | - | - | - | (1,735) | (1,735) |
| Loss for the year before taxation | (1,598) | ||||
| Taxation | (796) | ||||
| Loss for the year from continuing operations | (2,394) |
Other information - year to 31 December 2008
|
| ||||
| UK | France | Consolidated | ||
| £'000 | £'000 | £'000 | ||
| Capital additions | 792 | 477 | 1,269 | |
| Depreciation and amortisation | ||||
| Depreciation on property, plant and equipment | 330 | 110 | 440 | |
| Amortisation of non-acquired intangible assets | 775 | 125 | 900 | |
| Amortisation of acquired intangible assets | 77 | 420 | 497 | |
| 1,182 | 655 | 1,837 | ||
| Other information - year ended 31 December 2007 | ||||
| UK | France | Consolidated | ||
| £'000 | £'000 | £'000 | ||
| Capital additions | 1,835 | 231 | 2,066 | |
| Depreciation and amortisation | ||||
| Depreciation on property, plant and equipment | 405 | 74 | 479 | |
| Amortisation of non-acquired intangible assets | 1,441 | 64 | 1,505 | |
| Amortisation of acquired intangible assets | 145 | 361 | 506 | |
| 1,991 | 499 | 2,490 | ||
| Balance sheet at 31 December 2008 | ||||
| UK | France | Unallocated | Consolidated | |
| £'000 | £'000 | £'000 | £'000 | |
| Segment assets | 2,614 | 21,506 | - | 24,120 |
| Segment liabilities | 13,142 | 8,331 | - | 21,473 |
| Balance sheet at 31 December 2007 | ||||
| UK | France | Unallocated | Consolidated | |
| £'000 | £'000 | £'000 | £'000 | |
| Segment assets | 14,882 | 42,403 | 208 | 57,493 |
| Segment liabilities | 16,791 | 6,782 | 154 | 23,727 |
7. Loss for the year
Loss for the year has been arrived at after charging:
| Year to 31 December 2008 | |||
| Continuing | Discontinued | ||
| operations | operations | Total | |
| 2008 | 2008 | 2008 | |
| £'000 | £'000 | £'000 | |
| Foreign exchange losses | 3 | - | 3 |
| Loss on disposal of tangible assets | - | 473 | 473 |
| Impairment of tangible assets (note 17) | - | 247 | 247 |
| Depreciation on property, plant and equipment (note 17) | 110 | 330 | 440 |
| Loss on disposal of other intangible assets (note 16) | - | 43 | 43 |
| Amortisation of intangible assets (note 16) | 545 | 852 | 1,397 |
| Impairment of intangible assets (note 16) | - | 2,588 | 2,588 |
| Impairment of goodwill (note 15) | 27,485 | 4,350 | 31,835 |
| Staff costs (see note 10) | 8,004 | 4,610 | 12,614 |
| Year ended 31 December 2007 | |||
| Continuing | Discontinued | ||
| operations | operations | Total | |
| 2007 | 2007 | 2007 | |
| £'000 | £'000 | £'000 | |
| Foreign exchange losses | 4 | - | 4 |
| Loss on disposal of tangible assets | - | 20 | 20 |
| Depreciation on property, plant and equipment (note 17) | 74 | 405 | 479 |
| Amortisation of internally generated intangible assets (note 16) | - | 97 | 97 |
| Amortisation of other intangible assets (note 16) | 63 | 1,345 | 1,408 |
| Amortisation of acquisition related intangible assets (note 16) | 361 | 145 | 506 |
| Impairment of internally generated intangible assets (note 16) | - | - | - |
| Impairment of other intangible assets (note 16) | 68 | - | 68 |
| Impairment of acquisition related intangible assets (note 16) | - | - | - |
| Impairment of goodwill (note 15) | - | - | - |
| Adjustment to goodwill on recognition of tax assets (note 15) | - | 30 | 30 |
| Staff costs (see note 10) | 3,928 | 9,572 | 13,500 |
8. Auditors' remuneration
The analysis of auditors' remuneration is as follows:
| 2008 | 2007 | |
| £'000 | £'000 | |
| Fees payable to the Company's auditors for the audit of the Company's annual accounts | 60 | 68 |
| Fees payable to the Company's auditors and their associates for the audit of the Company's subsidiaries pursuant | ||
| to legislation | 103 | 68 |
| Total audit fees | 163 | 136 |
| Fees payable to the Company's auditors and their associates for other services to the Group: | ||
| - Tax services | 98 | 48 |
| - Transaction services | 11 | 40 |
| 109 | 88 | |
| 272 | 224 |
9. Adjusted operating profit and Adjusted EBITDA
Year to 31 December 2008
| Continuing | Discontinued | ||
| Operations | Operations | Total | |
| 2008 | 2008 | 2008 | |
| £'000 | £'000 | £'000 | |
| Reported operating loss | (29,517) | (7,675) | (37,192) |
| Add back: | |||
| - share-based payment charge | 256 | - | 256 |
| - amortisation of acquisition related intangible assets (note 16) | 420 | 77 | 497 |
| Adjusted operating loss | (28,841) | (7,598) | (36,439) |
| Add back: | |||
| - depreciation on property, plant and equipment (note 17) | 110 | 330 | 440 |
| - amortisation of non-acquisition related intangible assets (note 16) | 125 | 775 | 900 |
| Adjusted EBITDA | (28,606) | (6,493) | (35,099) |
Year ended 31 December 2007
| Continuing | Discontinued | ||
| Operations | Operations | Total | |
| 2007 | 2007 | 2007 | |
| £'000 | £'000 | £'000 | |
| Reported operating profit/(loss) | (5) | 632 | 627 |
| Add back: | |||
| - share-based payment charge | 145 | - | 145 |
| - adjustment to goodwill on recognition of tax assets (note 15) | 30 | - | 30 |
| - amortisation of acquisition related intangible assets (note 16) | 361 | 145 | 506 |
| Adjusted operating profit | 531 | 777 | 1,308 |
| Add back: | |||
| - depreciation on property, plant and equipment (note 17) | 73 | 406 | 479 |
| - amortisation of non-acquisition related intangible assets (note 16) | 64 | 1,441 | 1,505 |
| Adjusted EBITDA | 668 | 2,624 | 3,292 |
10. Staff costs
The average monthly number of employees (including executive directors) was:
| 2008 | 2007 | |
| No. | No. | |
| Sales | 79 | 129 |
| Administration | 174 | 173 |
| 253 | 302 | |
| 2008 | 2007 | |
| £'000 | £'000 | |
| Wages and salaries | 9,777 | 11,225 |
| Social security costs | 2,761 | 2,130 |
| Share-based payments charge - equity settled | 76 | 145 |
| 12,614 | 13,500 | |
| Information in relation to Directors' remuneration is shown in the Remuneration Report. |
11. Finance costs
Continuing Operations
| 2008 | 2007 | |
| £'000 | £'000 | |
| Interest on bank overdrafts and loans | 429 | 145 |
| Foreign exchange loss on loan payable | 379 | 439 |
| Foreign exchange loss on deferred consideration payable | 978 | 527 |
| Interest accretion on deferred consideration payable | 352 | 624 |
| Restructuring fee | 515 | - |
| 2,653 | 1,735 |
12. Taxation
The tax charge comprises:
Continuing Operations
| 2008 | 2007 | |
| £'000 | £'000 | |
| Current tax | (1,026) | (846) |
| Released through equity | - | (27) |
| (1,026) | (873) | |
| Deferred tax | - | (43) |
| Origination and reversal of timing differences | 233 | 120 |
| 233 | 77 | |
| Total tax charge on loss on ordinary activities from continuing operations | (793) | (796) |
The UK corporation tax rate changed to 28% in April 2008 (2007: 30%). The average rate for the year was 28.5%. Taxation for France is calculated at the rates prevailing in France.
Reconciliation of tax charge:
| 2008 | 2008 | 2007 | 2007 | |
| £'000 | % | £'000 | % | |
| Loss on ordinary activities before tax | (32,094) | (1,598) | ||
| Tax at the UK corporation tax rate of 28.5% | 9,147 | 28.50% | 479 | 30% |
| Effects of: | ||||
| Tax effect of expenses that are not deductible in determining taxable profit | (9,789) | (305%) | (1,203) | (15%) |
| Effect of different tax rates in subsidiary operating in other jurisdictions | (151) | (1%) | (72) | (5%) |
| Tax charge for period | (793) | (3%) | (796) | (72%) |
13. Discontinued operations
The results of the discontinued operations, which have been included in the consolidated income statement, were as follows:
| Year | Year | |
| ended | ended | |
| 2008 | 2007 | |
| £'000 | £'000 | |
| Revenue | 10,195 | 17,435 |
| Impairment of goodwill and acquisition related intangibles | (5,142) | - |
| Other expenses | (12,728) | (16,803) |
| (Loss)/profit before tax | (7,675) | 632 |
| Attributable tax credit | 183 | 101 |
| Loss on disposal of discontinued operations | (950) | - |
| Net (loss)/profit attributable to discontinued operations | (8,442) | 733 |
Discontinued operations include the businesses sold during the year disclosed in note 28 and the loss on sale reported by the Group.
During the year, discontinued operations contributed £334k (2007: £1,682k) to the Group's net operating cash flows and £537k (2007: £5,143k) in respect of investing activities. Financing activities from discontinued operations were £nil (2007: £nil).
The effect of discontinued operations on segment results is disclosed in note 6.
14. (Loss)/earnings per share
| 2008 | 2007 | |||||
| Profit/ | Number | Pence | Profit/ | Number | Pence | |
| (loss) | of shares | per share | (loss) | of shares | per share | |
| £'000 | '000 | £'000 | '000 | |||
| Adjusted earnings* | (356) | 48,853 | (0.3) | 446 | 44,739 | 1 |
| Reconciliation to reported earnings: | - | |||||
| - share-based payments | (256) | - | (0.5) | (145) | - | (0.3) |
| - | ||||||
| adjustment to goodwill on recognition of tax | ||||||
| assets | - | - | (0.6) | (30) | - | (0.1) |
| - amortisation of acquisition related intangibles | (497) | - | (1) | (506) | - | (1.1) |
| - | ||||||
| foreign currency translation adjustment and | ||||||
| interest accretion on contingent consideration | (1,330) | - | (2.7) | (1,151) | - | (2.6) |
| - | ||||||
| foreign exchange movements on foreign | ||||||
| currency loans | (379) | - | (0.8) | (439) | - | (1) |
| - goodwill impairment | (31,835) | - | (65.2) | - | - | - |
| - impairment of acquisition related intangibles | (791) | - | (1.6) | - | - | - |
| - data cost impairment | (1,562) | - | (3.2) | - | - | - |
| - website cost impairment | (200) | - | (0.4) | - | - | - |
| - restructuring costs | (4,498) | - | (9.2) | - | - | - |
| - tax effect of the above items | 375 | - | 0.8 | 164 | - | 0.4 |
| Basic (loss)/earnings per share | (41,329) | 48,853 | (84.6) | (1,661) | 44,739 | (3.7) |
| from continuing operations | (32,887) | - | (67.3) | (2,394) | - | (5.4) |
| from discontinued operations | (8,442) | - | (17.3) | 733 | - | 1.7 |
* Adjusted earnings per share figures are reported before charges for share-based payments, adjustment to goodwill on recognition of tax assets, amortisation of acquisition related intangibles, foreign currency translation adjustment on contingent consideration, interest accretion on contingent consideration, movements on foreign currency loans and non-recurring items, goodwill impairment, impairment of acquisition related intangibles, data cost impairment, website cost impairment, restructuring costs, tax effect of the above items because this is considered to be a more consistent measure of underlying performance.
15. Goodwill
| Total | |
| £'000 | |
| Cost | |
| At 1 January 2007 | 22,813 |
| Recognised on acquisition of a subsidiary | 7,148 |
| Adjustment to deferred consideration | (669) |
| Exchange differences | 1,933 |
| At 1 January 2008 | 31,225 |
| Adjustment to deferred consideration | (803) |
| Exchange differences | 8,243 |
| At 31 December 2008 | 38,665 |
| Accumulated impairment losses | |
| At 1 January 2007 | 188 |
| Adjustment to goodwill on recognition of tax assets | 30 |
| At 1 January 2008 | 218 |
| Impairment losses for the year | 31,835 |
| At 31 December 2008 | 32,053 |
| Carrying amount | |
| At 31 December 2008 | 6,612 |
| At 31 December 2007 | 31,006 |
The UK segment incurred impairments of £4,351,000 relating to Postal Preference Services Ltd sold on 29 September 2008, Direct Dormant Ltd 1 and Direct Dormant 2 Ltd businesses sold on 30 October 2009, Newsletters On-Line Ltd group & The Real World Customer Experience Ltd group both sold with effect 30 September 2008. The France segment incurred impairments of £27,485,000 relating to Directinet SA and NP6 SAS. The impairments were triggered by the poor performance of the UK businesses, culminating in their disposal in the second half of the year, and a downturn in the forecast results of the French businesses.
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired.
15. Goodwill (continued)
The recoverable amounts are based on the higher of value in use and fair value less costs to sell. The key assumptions for the value in use calculations are those regarding the discount rates and growth rates. Management estimates discount rates using rates that reflect current market assessments of the time value of money and the risks specific to the cash-generating units.
The Group prepares cash flow forecasts derived from the most recent financial budgets approved by the management for the next 1-3 years. No growth is assumed beyond that date for France (June 2008: a steady long-term growth rate of 2%).
The rate used to discount the forecast cash flows is 15% (June 2008: 10.12%).
16. Other intangible assets
| Acquisition related intangible assets | Other intangible assets | ||||||||
| Customer | Trade | Forward | Website | Data | Software | ||||
| relations | names | orders | Software | costs | costs | Licences | assets | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Cost | |||||||||
| At 1 January 2007 | 2,757 | 132 | 59 | - | 253 | 3,557 | 19 | 573 | 7,350 |
| On acquisition | 1,122 | 143 | 223 | 147 | - | - | 7 | 1,642 | |
| Additions | - | - | - | - | 81 | 1,100 | - | 283 | 1,464 |
| Impairment | - | - | - | - | - | -68 | - | - | (68) |
| Exchange differences | - | - | - | - | - | 1 | - | 8 | 9 |
| At 1 January 2008 | 3,879 | 275 | 282 | 147 | 334 | 4,590 | 19 | 871 | 10,397 |
| Additions | - | - | - | - | 62 | 636 | - | 152 | 850 |
| Disposal | - | - | - | - | - | - | - | (221) | (221) |
| Impairment | (698) | -93 | - | - | (200) | (1,562) | - | (35) | (2,588) |
| Exchange differences | - | - | - | - | - | 11 | - | 26 | 37 |
| At 31 December 2008 | 3,181 | 182 | 282 | 147 | 196 | 3,675 | 19 | 795 | 8,475 |
| Amortisation | |||||||||
| At 1 January 2007 | 310 | 15 | 59 | - | 39 | 1,624 | 19 | 369 | 2,435 |
| Charge for the year | 437 | 34 | 30 | 5 | 97 | 1,170 | 238 | 2,011 | |
| At 1 January 2008 | 747 | 49 | 89 | 5 | 136 | 2,794 | 19 | 607 | 4,446 |
| Charge for the year | 399 | 30 | 58 | 10 | 60 | 657 | - | 183 | 1,397 |
| Eliminated on disposal | - | - | - | - | - | - | - | (178) | (178) |
| Exchange differences | - | - | - | - | - | 5 | - | 8 | 13 |
| At 31 December 2008 | 1,146 | 79 | 147 | 15 | 196 | 3,456 | 19 | 620 | 5,678 |
| Net book value | |||||||||
| At 31 December 2008 | 2,035 | 103 | 135 | 132 | - | 219 | - | 173 | 2,797 |
| At 31 December 2007 | 3,132 | 226 | 193 | 142 | 198 | 1,796 | - | 264 | 5,951 |
All impairments and disposals related to Postal Preference Services Ltd sold on 29 September 2008, Direct Dormant 1 Ltd and Direct Dormant 2 Ltd businesses sold on 30 October 2009, Newsletters On-Line Ltd group & The Real World Customer Experience Ltd group both sold with effect 30 September 2008.
The amortisation period for customer relations and trade names is between 7 and 16 years. Forward orders are amortised over the remaining life of the relevant contracts which is between 11 months and 4 years. Acquisition related software is amortised over 15 years. Data acquisition and website development costs are amortised over 3 years. Licences are amortised over their estimated useful lives which range between 1 and 5 years. Non-acquired capitalised software assets are amortised over 2 years.
17. Property, plant and equipment
| Plant and | Computer | ||
| equipment | equipment | Total | |
| £'000 | £'000 | £'000 | |
| Cost | |||
| At 1 January 2007 | 296 | 1,488 | 1,784 |
| Acquired on acquisition | 19 | 21 | 40 |
| Additions | 234 | 368 | 602 |
| Disposals | (1) | (43) | (44) |
| Exchange differences | 6 | 12 | 18 |
| At 1 January 2008 | 554 | 1,846 | 2,400 |
| Additions | 189 | 230 | 419 |
| Disposals | (251) | (1,033) | (1,284) |
| Impairment | (196) | (51) | (247) |
| Exchange differences | 18 | 108 | 126 |
| At 31 December 2008 | 314 | 1,100 | 1,414 |
| Accumulated depreciation | |||
| At 1 January 2007 | 139 | 848 | 987 |
| Charge for the year | 66 | 413 | 479 |
| Eliminated on disposal | (1) | (22) | (23) |
| Exchange differences | 2 | 6 | 8 |
| At 1 January 2008 | 206 | 1,245 | 1,451 |
| Charge for the year | 97 | 343 | 440 |
| Eliminated on disposal | (103) | (631) | (734) |
| Exchange differences | 5 | 11 | 16 |
| At 31 December 2008 | 205 | 968 | 1,173 |
| Net book value | |||
| At 31 December 2008 | 109 | 132 | 241 |
| At 31 December 2007 | 348 | 601 | 949 |
18. Subsidiaries
All principal subsidiaries of the Group are consolidated into the financial statements. At 31 December 2008 the subsidiaries were as follows:
| Country of | ||||
| Subsidiary undertakings | registration | Principal activity | Holding | % |
| Direct Excellence Ltd (previously known as | ||||
| Interactive Prospect Targeting Ltd) | UK | Intermediate holding company | Ordinary shares | 100% |
| Directinet SA* | France | Online Direct Marketing | Ordinary shares | 100% |
| Netcollections SAS * | France | Online Direct Marketing | Ordinary shares | 100% |
| NP6 SAS* | France | Online Direct Marketing | Ordinary shares | 100% |
| MailPerformance UK Ltd* | UK | Online Direct Marketing | Ordinary shares | 100% |
| Netcollections Ltd* | UK | Dormant | Ordinary shares | 100% |
| Direct Dormant 1 (previously known as | ||||
| Direct Excellence Ltd) | UK | Dormant | Ordinary shares | 100% |
| Direct Dormant 2 (previously known as Integra Insight Ltd) * | UK | Dormant | Ordinary shares | 100% |
| Emailbureau Ltd* | UK | Dormant | Ordinary shares | 100% |
| Directex Realisations Ltd (previously known as | ||||
| Direct Excellence Holdings Ltd) | UK | Dormant | Ordinary shares | 100% |
| *Held through subsidiary undertaking. |
19. Other financial assets
Trade and other receivables
|
| 2008 | 2007 |
| £'000 | £'000 | |
| Trade receivables | 9,399 | 13,303 |
| Provision for doubtful debts | (456) | (583) |
| 8,943 | 12,720 | |
| Other debtors | 100 | 72 |
| Prepayments and accrued income | 861 | 1,249 |
| VAT recoverable | 290 | - |
| 10,194 | 14,041 |
Trade receivables
Total trade receivables (net of provisions) held by the Group at 31 December 2008 amounted to £8.9m (2007: £12.7m).
The average credit period taken on sales is 79 days (2007: 95 days). No interest is charged on the receivables. A provision has been made for estimated irrecoverable amounts from the sales of services of £0.5 m (2007: £0.6m). This provision has been made by reference to past default experience. The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
In the Group's French operations, potential customers are assessed internally. Clients that are deemed to present a credit risk are required to make up front payment.
Included in the Group's trade receivable balance are debtors with a carrying amount of £2.6m (2007: £6.6m) which are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable. The Group does not hold any collateral over these balances. The average age of these receivables is 67 days (2007: 63 days).
Ageing of past due debt but not impaired receivables
| 2008 | 2007 | |
| £'000 | £'000 | |
| 30-60 days | 1,228 | 3,594 |
| 60-90 days | 884 | 2,143 |
| 90+ days | 493 | 834 |
| Total | 2,605 | 6,571 |
Movement in the provision for doubtful debts
| 2008 | 2007 | |
| £'000 | £'000 | |
| Balance at the beginning of the period | 583 | 351 |
| Exchange differences | 20 | - |
| Impairment losses recognised | 315 | 625 |
| Amounts written off as uncollectible | - | (316) |
| Amounts recovered during the year | (53) | (70) |
| Impairment losses reversed | (409) | (7) |
| Balance at the end of the period | 456 | 583 |
In determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the Directors believe that there is no further credit provision required in excess of the provision for doubtful debts. Ageing of impaired trade receivables
| 2008 | 2007 | |
| £'000 | £'000 | |
| 30-60 days | 11 | 14 |
| 60-90 days | 51 | 37 |
| 90+ days | 510 | 887 |
| Total | 572 | 938 |
The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
19. Other financial assets (continued)
Cash and cash equivalents
| 2008 | 2007 | |
| £'000 | £'000 | |
| Cash and cash equivalents | 3,704 | 4,710 |
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less. The Directors consider that the carrying amount of these assets approximates their fair value.
20. Borrowings
| 2008 | 2007 | |
| £'000 | £'000 | |
| Secured borrowing at amortised cost | ||
| Bank loans | 6,961 | 4,797 |
| Total borrowings | ||
| Amount due for settlement within 12 months | 6,961 | 800 |
| Amount due for settlement after 12 months | - | 3,997 |
The Group has a bank loan of €7.2m (2007: €6.5m). The loan of €6.5m was under an arrangement dated 13 June 2007. A restructuring fee of €0.65m was added on 26 September 2008.
As part of the loan restructure, certain conditions were due to be fulfilled by 15 December 2008. The Group failed to fulfil some of these conditions and on 29 December 2008 received formal notification from Barclays that the Group was in default under the terms of the restructuring. Barclays confirmed to the Group that it had no current intention of enforcing its rights or taking any immediate action in respect of the breaches under the terms of the restructuring, but it reserved the right to do so.
The repayments were due in four equal instalments of €1.625m payable on 31 October 2009, 30 April 2010, 31 October 2010 and 30 April 2011. The rescheduling fee of €0.65m is payable on 31 October 2011. The loan bore interest at 5% above Euribor payable six monthly in arrears, the first payment to be made on 30 April 2009.
Following the NP6 settlement disclosed in note 32, a total of €3.25m has been repaid, reducing the principal loan amount to €3.9m. As a result of this reduction the interest rate on the outstanding debt has been reduced from 5% to 2.5% above Euribor.
The Barclays indebtedness remains in default and the Board is actively working to repay the full amount of the remaining debt as quickly as possible, with the intention that it should be repaid from the proceeds of sale of Directinet and Netcollections.
Due to the loan covenants being in breach during the year, the bank loan was subsequently repayable on demand and has therefore been classified as current.
21. Trade and other payables
| 2008 | 2007 | |
| £'000 | £'000 | |
| Current | ||
| Trade payables | 2,834 | 3,539 |
| Other taxation and social security | 1,773 | 1,988 |
| Employee benefits - other | - | 40 |
| Other payables | 760 | - |
| Accruals and deferred income | 4,014 | 3,900 |
| 9,381 | 9,467 |
The average credit period taken for trade purchases is 55 days (2007: 49 days). The Directors consider the carrying amount of trade payables approximates to their fair value.
22. Provisions
|
| Restructuring |
| Provision | |
| £'000 | |
| As at 1 January 2008 | - |
| Additional provision in the year | 1,772 |
| At 31 December 2008 | 1,772 |
| Included in current liabilities | 526 |
| Included in non-current liabilities | 1,246 |
| 1,772 |
Provisions represent the best estimate of restructuring costs including the onerous lease provision at the balance sheet date. The provision for onerous lease commitments has been calculated at the net present value of rents payable less rents receivable (having taken account of potential void periods and lease incentives) up to the break date of the lease. Allowance has been made for empty rates and agents' fees.
On 11 December 2009 the Company agreed terms with the landlord of the Group's head offices at Vincent Square under which the Group has acquired an option to assign the Vincent Square leases to the landlord's ultimate parent company shortly after the completion of the proposed sale of Directinet and Netcollections, thereby extinguishing all the Group's obligations under those leases. The net cost of these assignments will be approximately £1,000,000 which will be satisfied out of the sale proceeds of Directinet and Netcollections.
23. Financial instruments
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which includes the borrowings, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings, all as disclosed in the balance sheet.
Gearing ratio
The gearing ratio at the year end is as follows:
| 2008 | 2007 | |
| £'000 | £'000 | |
| Debt | 6,961 | 4,797 |
| Cash and cash equivalents | (3,704) | (4,710) |
| Net debt | 3,257 | 87 |
| Equity | 2,648 | 33,766 |
| Net debt to equity ratio | 123% | 0.30% |
Debt is defined as borrowings, as detailed in note 20.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 3 to the financial statements.
Financial risk management objectives
The Group monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyses exposures by degree and magnitude of risks. These risks include market risk, credit risk and liquidity risk.
Market risk
The Group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates. The Group enters into a net investment hedge to manage its exposure to foreign currency risk arising on translation of the Group's borrowings.
Foreign currency risk management
The Group undertakes certain tranactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters.
The Group's approach to managing this exposure is to fund investments in Euro-denominated operations with debt that is denominated in the same currency as the operations. Refer to note 20 for further information on the bank loan.
Foreign currency sensitivity analysis
The Group is mainly exposed to the currency of France (Euro currency).
At 31 December 2008 the net assets of the Group were £2,647k (2007: £33,766k) of which £8,805k were denominated in Euros (2007: £30,824k).
23. Financial instruments (continued)
The effect of a 5% increase in the value of the Euro compared to Sterling would increase the net assets of the Group as at 31 December 2008 by £449k (2007: £1,541k). The effect of a 5% decrease in the value of the Euro compared to Sterling would decrease the net assets of the Group as at 31 December 2008 by £449k (2007: £1,541k).
Interest rate risk management
The Group is exposed to interest rate risk as entities in the Group borrow funds at Euribor plus 2.5%.
The Group's exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note.
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments during the year.
| Increase/(decrease) in profit before tax | ||
| Group | Group | |
| 2008 | 2007 | |
| £'000 | £'000 | |
| Increase interest rate by 1% | 59 | 23 |
| Decrease interest rate by 1% | (59) | (23) |
There would have been no effect on amounts recognised directly in equity.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group.
The Group's maximum exposure to credit risk is £13,795k (2007: £18,751k) comprising trade and other receivables and cash. The Group's principal credit risk is attributable primarily to its trade receivables of £8,943k (2007: £12,770k).
Potential customers are evaluated for creditworthiness and where necessary collateral is secured. There is no particular industry concentration of credit risk within the customer base as no one customer accounts for more than 3% of gross receivables.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which monitors the Group's short, medium and long-term funding and liquidity management requirements on a regular basis. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities.
Liquidity and interest risk tables
The following table details the Group's remaining contractual maturity for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest dates on which the Group can be required to pay. The table includes both interest and principal cash flows.
2008 Maturity
| Weighted | ||||||
| average | ||||||
| effective | ||||||
| interest | Less than | One to | Two to | More than | ||
| rate | one year | two years | five years | five years | Total | |
| % | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Group | ||||||
| Variable rate debt instruments | 7.3 | 7,469 | - | - | - | 7,469 |
2007 Maturity
|
| Weighted | |||||
| average | ||||||
| effective | ||||||
| interest | Less than | One to | Two to | More than | ||
| rate | one year | two years | five years | five years | Total | |
| % | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Group | ||||||
| Variable rate debt instruments | 6.37 | 851 | 1,701 | 2,551 | - | 5,103 |
24. Deferred tax
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior reporting period.
|
| Accelerated | Share | ||||
| Intangible | tax | Employee | based | |||
| assets | depreciation | holidays | payments | Tax losses | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | ||
| Balance at 1 January 2007 | (866) | 41 | 1 | 381 | 336 | (107) |
| Acquisition of subsidiary | (535) | - | - | - | 25 | (510) |
| Credit to equity | - | - | - | (149) | - | (149) |
| Charge/(credit) to income | 154 | (21) | 10 | (26) | 76 | 193 |
| Effect of change in tax rate | ||||||
| - income statement | 24 | - | - | - | 9 | 33 |
| - equity | - | - | - | (4) | - | (4) |
| At 31 December 2007 | (1,223) | 20 | 11 | 202 | 446 | (544) |
| Credit to equity | (195) | (195) | ||||
| Charge/(credit) to income | 390 | (20) | (11) | (7) | (446) | (94) |
| At 31 December 2008 | (833) | - | - | - | - | (833) |
Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
| 2008 | 2007 | |
| £'000 | £'000 | |
| Deferred tax liabilities | (833) | (1,223) |
| Deferred tax assets | - | 679 |
| (833) | (544) |
At the balance sheet date, the Group had unused tax losses of £7.1m (2007: £7.9m) available for offset against future profits. No deferred tax asset has been recognised in respect of these losses (2007: £0.4m) due to the unpredictability of future profit streams.
At 31 December 2008, the aggregate amount of temporary differences associated with undistributed earnings of the Group for which deferred tax liabilities have not been recognised was £6.4m (2007: £4.6m). No liability has been recognised in respect of these differences because the Group is in a position to control the timing of the reversal of these differences and either it is possible that such differences will not reverse in the foreseeable future or no tax is payable on the reversal.
25. Called up share capital
|
| 2008 | 2007 |
| £'000 | £'000 | |
| Authorised | ||
| 60m ordinary shares of 0.4p each | 240 | 240 |
| Called up, allotted and fully paid | ||
| 50.5m (2007: 44.8m) ordinary shares of 0.4p each | 202 | 179 |
Share issues in the year ended 31 December 2008
5.68m shares with a nominal value of £22,731 were allotted during the year:
* 4 April - 2,917,222 to satisfy part of the deferred consideration due in relation to the acquisition of Directinet;
* 11 April - 2,539,818 to satisfy part of the deferred consideration due in relation to the acquisition of NP6; and
* 14 May - 226,110 to satisfy part of the deferred consideration due in relation to the acquisition of Real World Customer Experience Limited.
No new shares were issued in connection with the exercise of share options, which were satisfied by the transfer of shares from the Employee Benefit Trust.
26. Own shares
EBT Shareholding
The Interactive Prospect Targeting Employee Benefit Trust ("EBT") was established to satisfy the exercise of share options. The trustee of the EBT, Fairbairn Trust Limited, purchases the Company's ordinary shares in the open market with financing provided by the Company, as required. The current market value of the shares has led to the revaluation of the carrying cost of these shares.
2008
| Number | Cost | |
| '000 | £'000 | |
| At 1 January 2007 | 104 | 215 |
| Acquired in the period | 1,552 | 170 |
| Disposed of on exercise of options | (1,431) | (9) |
| At 1 January 2008 | 225 | 376 |
| Disposed of on exercise of options | (10) | (2) |
| Fair value write down | - | (374) |
| Ordinary shares of 0.4p each | 215 | - |
27. Total equity
| Share | Share | Profit | |||||
| Share | premium | Other | Own | options | and loss | ||
| capital | account | reserve | shares | reserve | account | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Balance at 1 January 2007 | 177 | 23,437 | 2,372 | (215) | 134 | 6,854 | 32,759 |
| Prior year amendment | - | - | - | - | - | (400) | (400) |
| Issue of shares | 2 | 1,018 | - | - | - | - | 1,020 |
| Loss retained for the year | - | - | - | - | - | (1,661) | (1,661) |
| Items taken directly to equity | - | - | - | - | - | 2,197 | 2,197 |
| Purchase of own shares | - | - | - | (323) | - | - | (323) |
| Share options exercised | - | 20 | - | 9 | - | - | 29 |
| Share-based payments transactions | - | - | - | - | 145 | - | 145 |
| Balance at 1 January 2008 | 179 | 24,475 | 2,372 | (529) | 279 | 6,990 | 33,766 |
| Balance at 1 January 2008 | 179 | 24,475 | 2,372 | (529) | 279 | 6,990 | 33,766 |
| Issue of shares | 23 | 2,205 | - | - | - | - | 2,228 |
| Loss retained for the year | - | - | - | - | - | (41,329) | (41,329) |
| Items taken directly to equity | - | - | - | - | - | 7,725 | 7,725 |
| Write down of own shares | - | - | - | 527 | - | (527) | - |
| Share options exercised | - | - | - | 2 | - | - | 2 |
| Share-based payments transactions | - | - | - | - | 256 | - | 256 |
| At 31 December 2008 | 202 | 26,680 | 2,372 | - | 535 | (27,142) | 2,647 |
The Company acquired the entire issued share capital of Interactive Prospect Targeting Limited pursuant to a share for share exchange on 1 December 2004. The Other reserve reflects the difference between the nominal value of the shares issued to acquire Interactive Prospect Targeting Limited and the cumulative value of the Company's share capital and share premium account at the date of acquisition.
28. Disposal of subsidiaries
| 31-Dec | ||
| Disposal Date | 2007 | |
| £'000 | £'000 | |
| Property, plant and equipment | 524 | 971 |
| Trade receivables | 2,584 | 5,654 |
| Accrued income and prepayments | 557 | 921 |
| Bank balances and cash | 151 | 808 |
| Trade payables | (1,091) | (1,677) |
| Amounts due under finance leases | (63) | - |
| Current tax liability | 36 | (511) |
| Deferred income and accruals | (192) | (1,554) |
| 4,612 | ||
| Loss on disposal | (950) | |
| Total consideration | 1,556 | |
| Satisfied by: | ||
| Cash | 1,328 | |
| Deferred consideration | 228 | |
| 1,556 | ||
| Net cash inflows arising from on disposal | ||
| Cash consideration | 1,328 | |
| Cash disposed | (151) | |
| 1,177 |
| Net | ||
| profit/(loss) | ||
| Effective | on disposal | |
| Subsidiary sold | date | £'000 |
| Direct Excellence Ltd business (formerly Interactive Prospect Targeting Ltd) | 29/09/2008 | (207) |
| Postal Preference Services Ltd | 29/09/2008 | (681) |
| The Integra Insight Ltd group businesses (now known as Direct Dormant 1 Ltd | ||
| & Direct Dormant 2 Ltd) | 31/10/2008 | 107 |
| The Real World Customer Experience Ltd group | 03/11/2008 | (31) |
| The Newsletter On-Line Ltd group | 11/11/2008 | (138) |
| (950) |
The deferred consideration of £228k payable by the purchaser of the Real World Customer Experience Ltd group was received by the 6th April 2009.
29. Reconciliation of operating loss to operating cash flows
| 2008 | 2007 | |
| £'000 | £'000 | |
| Continuing operating loss | (29,517) | (5) |
| Discontinued operating (loss) / profit (Note 13) | (7.675) | 632 |
| Depreciation and amortisation (Note 16 & 17) | 1,837 | 2,490 |
| Impairment on intangibles and property, plant and equipment (Note 16 & 17) | 2,835 | - |
| Impairment of goodwill (Note 15) | 31,835 | - |
| Adjustment to goodwill on recognition of tax assets | - | 30 |
| Share-based payment charge | 256 | 145 |
| Operating cash flows before movements in working capital | (429) | 3,292 |
| Decrease/(increase) in receivables | 1,872 | (4,939) |
| Increase in payables | 1,635 | 3,426 |
| Cash generated by operations | 3,078 | 1,779 |
| Taxation paid | (1,333) | (1,191) |
| Net cash from operating activities | 1,745 | 588 |
Cash and cash equivalents comprise cash at bank and other short-term highly liquid investments with a maturity of 3 months or less.
30. Share-based payments
Equity-settled share option schemes
The Group has granted options to certain directors and employees. Options are exercisable at a price equal to the average quoted market price of the Company's shares on the date of grant. The vesting period is generally 3 years. If the options remain unexercised after a period of 10 years from the date of grant the options expire. Options are forfeited if the employee leaves the Group before the options vest.
Details of the options and warrants outstanding during the year are as follows:
| 2008 | 2007 | |||
| Weighted | Weighted | |||
| average | average | |||
| Number of | exercise | Number of | exercise | |
| options | price | options | price | |
| '000s | £ | '000s | £ | |
| Outstanding at the beginning of the year | 3,423 | 1.18 | 2,628 | 1.21 |
| Options granted during the year | 1,255 | 0.24 | 1,601 | 1.11 |
| Exercised during the year | (10) | 0.2 | (135) | 0.23 |
| Forfeited during the year | (2,403) | 0.8 | (671) | 1.31 |
| Outstanding at the end of the year | 2,265 | 0.87 | 3,423 | 1.18 |
| Exercisable at the end of the year | 422 | 1.07 | 513 | 0.61 |
| Warrants issued during the year | 3,000 | - | - | - |
The weighted average share price at the date of exercise for options exercised during the period was £0.46.
The options outstanding at 31 December 2008 had a weighted average exercise price of £0.87 and a weighted average remaining contractual life of 7.9 years.
In the year ended 31 December 2007 options were granted on 28 March 2007 and 20 July 2007. The aggregate of the estimated fair values of the options granted on that date was £434,000.
30. Share-based payments (continued)
In the year to 31 December 2008 options were granted on 27 May 2008. The aggregate of the estimated fair values of the options granted on that date was £111,920.
In the year to 31 December 2008 warrants were issued on 24 October 2008. The aggregate of the estimated fair values of the warrants granted on that date was £180,000.
As a consequence of the business and company disposals in the latter part of 2008, 1,572,588 options have expired since year end. On 15 October 2009 a further 388,055 options expired due to the sale of NP6.
The inputs to the Black Scholes model are as follows:
| 27 May | 20 July | 28 March | |
| 2008 | 2007 | 2007 | |
| Share price at grant | 0.29 | 1.38 | 1.07 |
| Exercise price | 0.24 | 1.31 | 1.01 |
| Expected volatility | 13% | 14% | 14% |
| Expected life | 3-5 years | 3-5 years | 3-5 years |
| Risk free rate | 5.19% | 5.47% | 5.38% |
| Call option value | 0.09p | 0.30p | 0.23p |
Expected volatility is based on the historic volatility of the Alternative Investment Market in London, where the Company's shares are traded. The expected useful life in the model has been adjusted, based on management's best estimate for the effects of non-transferability, exercise restrictions and behavioural considerations.
31. Operating lease arrangements
| 2008 | 2007 | |
| £'000 | £'000 | |
| Minimum lease payments under operating leases recognised as an expense in the year | 891 | 306 |
At the balance sheet date the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
| 2008 | 2007 | |
| £'000 | £'000 | |
| Within one year | 876 | 140 |
| In the second to fifth year inclusive | 2,425 | 42 |
| After five years | 547 | - |
| 3,848 | 182 |
Operating leases represent rentals payable by the Group for certain of its office properties and office equipment.
32. Events after the balance sheet date
On 16 April 2009, NP6 including its subsidiary MailPerformance UK Limited was sold to Lerinardh SAS, a private equity backed vehicle of the previous owners. Lerinardh paid the Group £2.9m in cash and has undertaken to pay 50% of any supplementary capital gain if within six months it sells all or part of its shares in NP6. The settlement removed all claims that the vendors may have against the Group, including the release of a provision for £2.4m made in the Group accounts for the 2008 earn out.
Stephane Zittoun (a director of the company from 4 June 2008 until 11 February 2009) and Amoleen Invest SARL ("Amoleen"), a company in which Stephane Zittoun has a beneficial interest, are two of the previous owners and, as such, are parties to the NP6 Settlement. They are also shareholders in Lerinardh, which has acquired 100% of the shares in NP6. As such the transaction is a related party transaction.
The Board having consulted with Canaccord Adams Limited, the Company's nominated adviser, considers that entry into the NP6 Settlement referred to above is fair and reasonable insofar as the Company's shareholders are concerned.
On 11 December 2009 the Group reached agreement with Bisnode AB for the sale of Directinet and Netcollections, subject to a number of conditions including shareholders' consent, which if approved by shareholders at the Extraordinary General Meeeting on 4 January 2010 is expected to complete on or about 6 January 2010.
The amount receivable by the Group in respect of this sale comprises:
• An "Initial Consideration" of €7,000,000; and
• A "Balance Consideration" of €350,000,
subject to adjustments to take in account the "Actual Net Cash Amount" and the "Adjusted Working Capital Amount" of Directinet and Netcollections on 31 December 2009 as defined in the Sale and Purchase Agreement ("Adjustments").
32. Events after the balance sheet date (continued)
The Initial Consideration is payable on completion of the sale which is expected on or about 6 January 2010. The Balance Consideration (subject to the Adjustments) is payable following (i) the production of the accounts of Directinet and Netcollections for the year ended 31 December 2009 (by no later than 31 March 2010); and (ii) agreement on the extent of the Adjustments derived from those accounts. The Adjustments will vary on a day to day basis depending upon the cash flow and trading performance of Directinet and Netcollections.
The Sale and Purchase Agreement also provides for the possibility of an "Additional Consideration" of up to €1,000,000 linked to the operating performance of Directinet and Netcollections in 2009, but, based on the latest forecast of the current profitability of these companies, this is not expected to realise any further cash amounts.
In addition to the sale proceeds, the Group expects to receive settlement of amounts due by Directinet and Netcollections, amounting at the end of November 2009, to approximately €480,000. It is currently expected that the majority of this will be paid before completion with any balance paid by 31 March 2010.
The Group has given a number of warranties, but the Group's liability under them is capped at €100,000.
On 11 December 2009 the Company agreed terms with the landlord of the Group's head offices at Vincent Square under which the Group has acquired an option to assign the Vincent Square leases to the landlord's ultimate parent company shortly after the completion of the proposed sale of Directinet and Netcollections, thereby extinguishing all the Group's obligations under those leases.
The net cost of these assignments will be approximately £1,000,000 which will be satisfied out of the sale proceeds of Directinet and Netcollections. The Board has been advised that this is a good outcome for the Group and that the potential liability could have been significantly higher.
33. Related party transactions
Transactions between the Company and its subsidiaries which are related parties have been eliminated on consolidation and are not disclosed in these financial statements.
The remuneration of the Directors, who are the key management personnel of the Group, is set out in the Remuneration Report on pages 18 to 20.
The offices of NP6 in Pessac were leased from a company called H4M in which Stephane Zittoun (President NP6) has an interest. The lease runs up to the 31 March 2014. The rent in 2008 was £90,000 per annum.
InterInteractive Prospect Targeting Holdings plc
Company Accounts
31 December 2008
Independent auditors' report to the members of
Interactive Prospect Targeting Holdings plc
We have audited the parent Company financial statements of Interactive Prospect Targeting Holdings plc for the year ended 31 December 2008 which comprise the Balance Sheet and the related notes 1 to 13. These Parent Company financial statements have been prepared under the accounting policies set out therein.
We have reported separately on the Group financial statements of Interactive Prospect Targeting Holdings plc for the year ended 31 December 2008 and on the information in the Directors' remuneration report that is described as having been audited.
This report is made solely to the Company's members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The Directors' responsibilities for preparing the Annual Report, the Directors' Remuneration Report and the parent Company financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the Statement of Directors' Responsibilities.
Our responsibility is to audit the parent Company financial statements and the part of the Directors' Remuneration Report to be audited in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the parent Company financial statements give a true and fair view and whether the parent Company financial statements have been properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the Directors' Report is consistent with the parent Company financial statements.
In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other transactions is not disclosed.
We read the other information contained in the Annual Report as described in the contents section and consider whether it is consistent with the audited parent Company financial statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the parent Company financial statements. Our responsibilities do not extend to any further information outside the Annual Report.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the parent Company financial statements. It also includes an assessment of the significant estimates and judgments made by the Directors in the preparation of the parent Company financial statements, and of whether the accounting policies are appropriate to the Company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the parent Company financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the parent Company financial statements.
Opinion
In our opinion:
• the parent Company financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the Company's affairs as at 31 December 2008;
• the parent Company financial statements have been properly prepared in accordance with the Companies Act 1985; and
• the information given in the Directors' Report is consistent with the parent Company financial statements.
Emphasis of matter - going concern
Without qualifying our opinion, we draw attention to the disclosures made in note 3 of the financial statements concerning the concerning the Company's ability to continue as a going concern.
The ability of the Company to continue as a going concern is contingent upon the successful resolution of the following:
• The approval by the shareholders of the proposed sale of Directinet and Netcollections, and the subsequent completion of the Sale and Purchase Agreement following satisfaction of other conditions precedent.
• The continued support of Barclays Bank until completion and the repayment of their debt at completion.
• The surrender of the Vincent Square leases on the basis negotiated with the landlord, settlement of which will be made from the proceeds of the sale of Directinet and Netcollections.
These conditions, along with other matters as set forth in note 3, indicate the existence of a material uncertainty which may cast doubt over the Company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the company was unable to continue as a going concern.
Deloitte LLPChartered Accountants and Registered Auditors Reading, United Kingdom
17 December 2009
Company balance sheet
At 31 December 2008
| Notes | 2008 | 2007 | |
| £'000 | £'000 | ||
| Non-current assets | |||
| Investments | 4 | 2,712 | 26,586 |
| 2,712 | 26,586 | ||
| Current assets | |||
| Debtors | 5 | 711 | 1,254 |
| Cash at bank and in hand | 6 | 887 | - |
| 1,598 | 1,254 | ||
| Total assets | 4,310 | 27,840 | |
| Creditors: amounts falling due within one year | |||
| Trade and other payables | 7 | (2,605) | (2,005) |
| Provisions | 8 | (526) | - |
| (3,131) | (2,005) | ||
| Creditors: amounts falling due after more than one year | |||
| Amounts due to vendors | - | (1,890) | |
| Provisions | 8 | (1,246) | - |
| Total liabilities | (4,377) | (3,895) | |
| Net assets | (67) | 23,945 | |
| Capital and reserves | |||
| Called up share capital | 9,11 | 202 | 179 |
| Share premium account | 11 | 26,680 | 24,475 |
| Own shares | 10,11 | - | (529) |
| Share option reserve | 11,12 | 535 | 279 |
| Profit and loss account | 11 | (27,484) | (459) |
| Shareholders' funds | (67) | 23,945 |
In accordance with the exemptions permitted by s230 of the Companies Act 1985, the profit and loss account and the statement of total recognised gains and losses of the Company have not been presented. The loss for the financial year in the accounts of the Company amounted to £24,236,167 (2007: £955,000 loss).
The Company audit fee is included in the Group audit fee in the current and prior year and cannot be separately identified. Refer to note 8 in the consolidated financial statements.
These financial statements were approved by the Board of Directors on 17 December 2009
Signed on behalf of the Board of Directors
Nicholas WardChairman
Notes to the company financial statements
Year to 31 December 2008
1. Significant accounting policies
The separate financial statements of the Company are presented as required by the Companies Act 1985. They have been prepared under the historical cost convention and in accordance with applicable United Kingdom accounting standards and law. The principle accounting policies are summarised below. These have been applied throughout the current and preceding year.
Cash flow statement
Under the provisions of FRS 1 (Revised), the Company has not produced a cash flow statement on the grounds that the Group financial statements include a consolidated cash flow statement.
Investments
Fixed asset investments are shown at cost less provision for impairment. Current asset investments are stated at the lower of cost and net realisable value.
Taxation
Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the Group's taxable profits and its results as stated in the financial statements that arise from the inclusion of gains or losses in tax assessments in periods different from those in which they are recognised in the financial statements.
A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.
Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is not discounted.
Pension costs
The Company does not operate any pension plans.
Share-based payments
The Group operates a number of equity settled share-based compensation plans for the employees of subsidiary undertakings, using the Company's equity instruments. The cost of such awards is measured by reference to the fair value of the shares at the date of the award. At the end of each financial reporting period an estimate is made the extent to which those performance criteria will be met at the end of the vesting period and an appropriate charge recorded in the profit and loss account together with a corresponding credit to profit and loss reserves. Changes in estimates if the number of shares vesting may result in charges or credits to the profit and loss account in subsequent periods.
The fair value of the compensation given in respect of these share-based compensation plans is recognised as a capital contribution to the Company's subsidiary undertakings, over the vesting period. The capital contribution is reduced by any payments received from subsidiary undertakings in respect of these share-based payments.
Foreign currency
Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities at the balance sheet date are reported at the rates of exchange prevailing at that date. Gains or losses arising from a change in exchange rates subsequent to the date of transaction are included as an exchange gain or loss in the profit and loss account for the period.
Financial instruments
The Company's financial instruments comprise cash, liquid resources and various items such as trade debtors and creditors that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Company's operations. It is, and has been throughout the year under review, the Company's policy that no trading in financial instruments is undertaken.
2. Tax charge on loss on ordinary activities
The tax charge comprises
| 2008 | 2007 | |
| £'000 | £'000 | |
| Current tax | ||
| UK corporation tax | - | - |
| The difference between the total current tax as shown and the amounts calculated by applying the standard rate of UK corporation tax to the profit before tax is as follows: | ||
| 2008 | 2007 | |
| £'000 | £'000 | |
| Loss on ordinary activities before tax | -26,499 | (955) |
| Tax on loss on ordinary activities at standard UK corporation tax rate of 28.5% (2007: 30%) | 7,552 | 287 |
| Effects of: | ||
| Creation of losses | (1,720) | (244) |
| Non-deductible cost | (5,832) | (43) |
| Current tax charge for the year | - | - |
3. Staff costs
The Company did not have any employees during the year.
4. Fixed asset investments
| 2008 | 2007 | |
| Shares in subsidiaries | £'000 | £'000 |
| Cost and net book value | ||
| At 1 January | 26,586 | 24,275 |
| Additions during the year | - | 1,838 |
| Movement in deferred consideration on acquisitions | (244) | 192 |
| Disposals during the year | -(3,880) | - |
| Impairment | -20,006 | - |
| Capital contributions arising from share-based payments | 256 | 281 |
| At 31 December | 2,712 | 26,586 |
The Company held 100% of the issued share capital in the following subsidiary undertakings at 31 December 2008:
| Country of | ||||
| Subsidiary undertakings | registration | Principal activity | Holding | % |
| Direct Excellence Ltd (previously known as | ||||
| Interactive Prospect Targeting Ltd) | UK | Intermediate holding company | Ordinary shares | 100% |
| Directinet SA* | France | Online Direct Marketing | Ordinary shares | 100% |
| Netcollections SAS * | France | Online Direct Marketing | Ordinary shares | 100% |
| NP6 SAS* | France | Online Direct Marketing | Ordinary shares | 100% |
| MailPerformance UK Ltd* | UK | Online Direct Marketing | Ordinary shares | 100% |
| Netcollections Ltd* | UK | Dormant | Ordinary shares | 100% |
| Direct Dormant 1 (previously known as Direct Excellence Ltd) | UK | Dormant | Ordinary shares | 100% |
| Direct Dormant 2 (previously known as Integra Insight Ltd * | UK | Dormant | Ordinary shares | 100% |
| Emailbureau Ltd* | UK | Dormant | Ordinary shares | 100% |
| Directex Realisations Ltd (previously known as | ||||
| Direct Excellence Holdings Ltd) | UK | Dormant | Ordinary shares | 100% |
*Held through subsidiary undertaking.
5. Debtors
| 2008 | 2007 | |
| £'000 | £'000 | |
| Amounts due by Group undertakings | 40 | 1,244 |
| Other debtors | 289 | - |
| Prepayments and accrued income | 382 | 10 |
| 711 | 1,254 |
6. Cash at bank and in hand
These comprise cash held by the Company and immediately available bank deposits. The carrying amount of these assets approximates their fair value.
7. Trade and other payables
| 2008 | 2007 | |
| £'000 | £'000 | |
| Trade creditors | 381 | 155 |
| Amounts due to group undertakings | 1,398 | - |
| Payments due to vendors | 78 | 1,850 |
| Accruals and deferred income | 748 | - |
| 2,605 | 2,005 |
8. Provisions
| Restructuring | |
| Provision | |
| £'000 | |
| As at 1 January 2008 | - |
| Additional provision in the year | 1,772 |
| At 31 December 2008 | 1,772 |
| Included in current liabilities | 526 |
| Included in non-current liabilities | 1,246 |
| 1,772 |
Provisions represent the best estimate of restructuring costs including the onerous lease provision at the balance sheet date. The provision for onerous lease commitments has been calculated at the net present value of rents payable less rents receivable (having taken account of potential void periods and lease incentives) up to the end of the lease. Allowance has been made for empty rates and agents' fees.
On 11 December 2009 the Company agreed terms with the landlord of the Group's head offices at Vincent Square under which the Group has acquired an option to assign the Vincent Square leases to the landlord's ultimate parent company shortly after the completion of the proposed sale of Directinet and Netcollections, thereby extinguishing all the Group's obligations under those leases. The net cost of these assignments will be approximately £1,000,000 which will be satisfied out of the sale proceeds of Directinet and Netcollections.
9. Called up share capital and share premium account
The movements on these items are disclosed in notes 25 and 27 to the Consolidated Financial Statements.
10. Own shares
EBT Shareholding
The movements in own shares are disclosed in note 26 to the Consolidated Financial Statements.
11. Reserves
| Share | Share | Profit | ||||
| Share | premium | Own | options | and loss | ||
| capital | account | shares | reserve | account | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Balance at 1 January 2007 | 177 | 23,437 | (215) | 135 | 496 | 24,030 |
| Placing of shares | 2 | 1,018 | 1,020 | |||
| Loss retained for the year | (955) | (955) | ||||
| Purchase of own shares | (323) | (323) | ||||
| Share options exercised | 20 | 9 | 29 | |||
| Share-based payments transactions | 144 | 144 | ||||
| Balance at 1 January 2008 | 179 | 24,475 | (529) | 279 | (459) | 23,945 |
| Issue of shares | 23 | 2,205 | 2,228 | |||
| Loss retained for the year | (26,499) | (26,499) | ||||
| Write down of own shares | 527 | (527) | - | |||
| Share options exercised | 2 | 2 | ||||
| Share-based payments transactions | 256 | 256 | 256 | |||
| At 31 December 2008 | 202 | 26,680 | - | 535 | (27,485) | (67) |
12. Share-based payments
Equity-settled share option schemes
The Group grants options to certain directors and employees of its subsidiaries. The Company has made a capital contribution to its subsidiary undertakings in relation to share-based payments. During the year ended 31 December 2008, the capital contribution arising from share-based payments was £256,000 (2007: £144,000). The Company does not incur a profit and loss account charge in relation to share-based payments.
Full details of share-based payments, share options schemes and share plans are disclosed in note 29 to the Consolidated Financial Statements.
13. Related parties
The Company has taken advantage of the exemption in Financial Reporting Standard 8 (Related Parties) not to disclose transactions with other Group companies as these are eliminated on Group consolidation.
14. Post Balance Sheet events
Sale of NP6
On 16 April 2009, NP6 including its subsidiary MailPerformance UK Limited was sold to Lerinardh SAS, a private equity backed vehicle of the previous owners. Lerinardh paid the Group £2.9m in cash and has undertaken to pay 50% of any supplementary capital gain if within six months it sells all or part of its shares in NP6. The settlement removed all claims that the vendors may have against the Group, including the release of a provision for £2.4m made in the Group accounts for the 2008 earn out.
Stephane Zittoun (a director of the company from 4 June 2008 until 11 February 2009) and Amoleen Invest SARL ("Amoleen"), a company in which Stephane Zittoun has a beneficial interest, are two of the previous owners and, as such, are parties to the NP6 Settlement. They are also shareholders in Lerinardh, which has acquired 100% of the shares in NP6. As such the transaction is a related party transaction.
The Board having consulted with Canaccord Adams Limited, the Company's nominated adviser, considers that entry into the NP6 Settlement referred to above is fair and reasonable insofar as the Company's shareholders are concerned.
Sale of Directinet and Netcollections
On 11 December 2009 the Group reached agreement with Bisnode AB for the sale of Directinet and Netcollections, subject to a number of conditions including shareholders' consent, which if approved by shareholders at the Extraordinary General Meeeting on 4 January 2010 is expected to complete on or about 6 January 2010.
The amount receivable by the Group in respect of this sale comprises:
• An "Initial Consideration" of €7,000,000; and
• A "Balance Consideration" of €350,000
subject to adjustments to take in account the "Actual Net Cash Amount" and the "Adjusted Working Capital Amount" of Directinet and Netcollections on 31 December 2009 as defined in the Sale and Purchase Agreement ("Adjustments").
The Initial Consideration is payable on completion of the sale which is expected on or about 6 January 2010. The Balance Consideration (subject to the Adjustments) is payable following (i) the production of the accounts of Directinet and Netcollections for the year ended 31 December 2009 (by no later than 31 March 2010); and (ii) agreement on the extent of the Adjustments derived from those accounts. The Adjustments will vary on a day to day basis depending upon the cash flow and trading performance of Directinet and Netcollections.
The Sale and Purchase Agreement also provides for the possibility of an "Additional Consideration" of up to €1,000,000 linked to the operating performance of Directinet and Netcollections in 2009, but, based on the latest forecast of the current profitability of these companies, this is not expected to realise any further cash amounts.
In addition to the sale proceeds, the Group expects to receive settlement of amounts due by Directinet and Netcollections, amounting at the end of November 2009, to approximately €480,000. It is currently expected that the majority of this will be paid before completion with any balance paid by 31 March 2010.
The Group has given a number of warranties, but the Group's liability under them is capped at €100,000.
Vincent Square
On 11 December 2009 the Company agreed terms with the landlord of the Group's head offices at Vincent Square under which the Group has acquired an option to assign the Vincent Square leases to the landlord's ultimate parent company shortly after the completion of the proposed sale of Directinet and Netcollections, thereby extinguishing all the Group's obligations under those leases.
The net cost of these assignments will be approximately £1,000,000 which will be satisfied out of the sale proceeds of Directinet and Netcollections. The Board has been advised that this is a good outcome for the Group and that the potential liability could have been significantly higher.
15. Section 656 Companies Act 2006
The Companies Act provides that where the net assets of a company amount to half or less of the amount of its called-up share capital, the directors are obliged within 28 days of discovering the fact to convene a general meeting for the purpose of considering whether any, and if so what, measures should be taken to deal with the situation.
The Balance sheet of the Company as at 31 December 2008 shows negative net assets of £67,217, which is less than half the share capital of the Company of £202,075.
The net assets of the company reflect the value of its interest in its wholly owed subsidiary, Direct Excellence Limited, which in turn reflects the underlying carrying value at 31 December 2008 of its interest in Directinet and Netcollections.
The Section 656 shortfall came to light when the 2008 accounts were finalised following signature of the conditional agreement for the sale of Directinet and Netcollections on 11 December 2009.
The Board believes that the issue of the Section 656 shortfall has been addressed by the sale of Directinet and Netcollections and does not propose taking any further action.
Advisers
Registered Number
5173250 England and Wales
Group head office and registered address
1 Vincent Square London SW1P 2PN
Nominated Advisor and Broker
Canaccord Adams Limited 7th Floor, Cardinal Place 80 Victoria Street London SW1E 5JL
Principal Bankers
Barclays Bank PLC 1 Churchill Place Canary Wharf London E14 5HP
Solicitors
Berwin Leighton Paisner LLP Adelaide House London Bridge London EC4R 9HA
Registrars
Capita Registrars Limited The Registry 34 Beckenham Road Beckenham Kent BR3 4TU
Financial PR
College Hill Associates Limited The Registry Royal Mint Court London EC3N 4QN
Auditors
Deloitte LLP Reading RG1 3BD
Interactive Prospect Targeting Holdings plc 1 Vincent Square London SW1P 2PN United Kingdom
Telephone: +44 (0)20 7932 4400 Facsimile: +44(0)20 7932 4401
www.iptholdings.co.uk