Vela Technologies Regulatory News (VELA)

26 Sep 2007 07:01

Deal Group Media PLC26 September 2007 Press Release 26 September 2007 Deal Group Media plc ("DGM" or the "Group") Interim Results Deal Group Media plc, a leading online media-marketing Group, today announcesits Interim Results for the six months ended 30 June 2007. Financial • Revenue for the six months ended 30 June 2007 was £9.8 million (H1 2006: £12.8 million) • Operating Loss of £1.4 million (H1 2006: Loss £0.69 million) • EBITDA* for the period was a Loss of £952,000 as against a Loss of £289,000 for the previous year • Net investment in Asia Pacific region in half year of £160,000 • Successful placing of £850,000 in August 2007 to provide working capital and enable the continued expansion strategy in Asia Pacific * Calculated as profit before interest, tax, amortisation, depreciation or sharebased payments Operational • Successful launch of regional offices in Singapore and India with initial sales building • Executive Board now complete and supported by highly skilled senior management team Commenting on the results, Adrian Moss, Chief Executive, said: "We have madeconsiderable progress in the first six months in the Asia Pacific region and weare now well positioned to take advantage of the significant opportunities inthese territories. In the first quarter the UK operations have performed belowpotential due to increased competition. We are confident that the Group willreturn to profitability in 2008." For further information, please contact:Deal Group Media plcAdrian Moss, Chief Executive Tel: + 44 (0) 20 7943 4200 www.dealgroupmediaplc.com Evolution Securities LimitedTom Price, Corporate Finance Tel: +44 (0) 20 7071 4300Jeremy Ellis, Corporate Finance www.uk.evosecurities.com Media enquiries:Abchurch CommunicationsAriane Comstive / Franziska Boehnke Tel: +44 (0) 20 7398 7700franziska.boehnke@abchurch-group.com www.abchurch-group.com Chief Executive's statement As stated in a trading update dated 28 August 2007, the investment in the AsiaPacific region has commenced as planned. Overseas trading in the current yearhas been encouraging, and the Group is already seeing exciting opportunities forthe provision of complete digital solutions to clients in Asia Pacific from itsrecently launched regional base in Singapore. Trading in the UK has been below DGM's potential. The Group is expecting toreport a full year loss for the year ending 31 December 2007, however it isexpected that this will be reduced from the loss reported in 2006. Turnover for the six months ended 30 June 2007 was £9.8 million (H1 2006: £12.8million) while the operating loss was £1.4 million (H1 2006: Loss £690,000).EBITDA before share based payments was a loss of £952,000 as against loss of£289,000 for the previous year. The Group has converted to reporting under IFRS for the first time. The Boardstill intends to change the Group name however this has been delayed for thetime being. UK Operations Turnover in the period was £6.2 million (H1 2006: £9.7 million) with theaffiliate business remaining the core part of the UK operations. This divisionhas been affected by intense competition since the beginning of the financialyear however the second quarter saw an improvement in trading. The searchbusiness remains a small but profitable part of the Group's operations. Weremain confident in our ability to improve performance in the UK marketthroughout the remainder of the current financial year. Overseas Operations As previously announced, the Group expected to make a net investment of £1million in the Asia Pacific region in the current financial year. To date therehas been a net incremental investment of £160,000 as a result of prudent costcontrol. Turnover was up by 15% to £3.6 million (H1 2006: £3.1 million) andsignificant effort has been made into the recruitment and training of staff. We expect the contribution to the Group from existing overseas operations to bethe same as last year. Meanwhile, the small operation in South Africa commencedgenerating positive monthly cash flow in the second quarter. Also, the regional base in Singapore was successfully launched in mid August2007 and has already signed its first orders. We are confident that our wealthof knowledge of the industry put the Group in a strong position to takeadvantage of this fast expanding market and to service the South East Asianregion. In the second quarter we launched the Indian operation with offices in Mumbaiand Delhi. It has already established itself as a key player in this embryonicmarket place and although it is still early days, we are pleased with theprogress and revenues are starting to build. Board changes Martin Chalmers was appointed to the Board as Finance Director in April 2007.As a result we now have a complete executive Board which is complemented by astrong senior management team. Financing The Group has recently completed a successful placing which raised £850,000 inAugust 2007 to provide working capital and enable the Group to execute thecontinued expansion strategy in the Group's Asia Pacific operations. Furtherfunds will be required in the current financial year for working capitalpurposes and the Group is currently exploring possible sources of financing. Outlook We are extremely excited by the opportunities in the Asia Pacific region andmuch has been achieved in the last six months in establishing regional officesand putting in place the infrastructure and staff. The Group's skills andknowledge in terms of technology and experience poses a significant advantage ingaining market share. We remain confident that the Group will return toprofitability in 2008. Adrian MossChief Executive25 September 2007 Independent Review Report To Deal Group Media plc Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2007, which comprises the consolidated interimincome statement, the consolidated interim balance sheet, the consolidatedinterim statement of changes in equity, the consolidated interim cash flowstatement and notes 1 to 9. We have read the other information contained in theinterim report, which comprises only the directors and advisers and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. Our responsibilities do not extend to any otherinformation. This report is made solely to the Company, in accordance with guidance containedin APB Bulletin 1999/4 "Review of Interim Financial Information". Our reviewwork has been undertaken so that we might state to the company those matters weare required to state to it in a review report and for no other purpose. To thefullest extent permitted by law, we do not accept or assume responsibility toanyone other than the Company, for our review work, for this report, or for theconclusion we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the interim report. As disclosed in note 2 the next annual financial statements of Deal Group Mediaplc will be prepared in accordance with International Financial ReportingStandards as adopted by the European Union. This interim report has beenprepared in accordance with International Accounting Standard 34 "InterimFinancial Reporting" and the requirements of IFRS 1 "First-time Adoption ofInternational Financial Reporting Standards" relevant to the interim reports. The accounting policies are consistent with those the directors intend to use inthe next annual financial statements. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4"Review of Interim Financial Information" issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of making enquiriesof management and applying analytical procedures to the financial informationand underlying financial data and, based thereon, assessing whether theaccounting policies and presentation have been consistently applied unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance with UnitedKingdom auditing standards and therefore provides a lower level of assurancethan an audit. Accordingly, we do not express an audit opinion on the financialinformation. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. GRANT THORNTON UK LLPCHARTERED ACCOUNTANTSLONDON THAMES VALLEY OFFICESLOUGH 25 September 2007 The maintenance and integrity of the Deal Group Media plc website is theresponsibility of the directors: the interim review does not involveconsideration of these matters and, accordingly, the Company's reportingaccountants accept no responsibility for any changes that may have occurred tothe interim report since it was initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination ofthe interim report differ from legislation in other jurisdictions. Consolidated interim income statement for the six months ended30 June 2007 6 months 6 months Year to 30 Jun to 30 Jun to 31 Dec 2007 2006 2006 £'000 £'000 £'000 CONTINUING OPERATIONSRevenue 9,781 12,824 22,965Cost of sales (7,597) (9,322) (15,828) GROSS PROFIT 2,184 3,502 7,137 ADMINISTRATIVE EXPENSES- Amortisation (136) (87) (202)- Depreciation (166) (161) (328)- Share based payment (150) (153) (298)- Other administrative expenses (3,136) (3,791) (7,214) (3,588) (4,192) (8,042) LOSS FROM OPERATIONS (1,404) (690) (905) FINANCE COST (2) - (11)FINANCE INCOME 14 10 27 LOSS BEFORE TAX (1,392) (680) (889) Taxation 5 - (695) (1,806) TOTAL LOSS AFTER TAXATIONFOR PERIOD FROM CONTINUING OPERATIONS (1,392) (1,375) (2,695) BASIC LOSS PER SHARE 7 (0.34p) (0.36p) (0.71p)DILUTED LOSS PER SHARE 7 (0.34p) (0.36p) (0.71p) The accompanying accounting policies and notes form part of these financialstatements. Consolidated interim balance sheet as at 30 June 2007 As at As at As at 30 Jun 07 30 Jun 06 31 Dec 06 £'000 £'000 £'000ASSETSNON-CURRENT ASSETSProperty, plant and equipment 352 459 503Intangible assets 6,717 6,472 6,630Available for sale financial assets 256 - 152Deferred tax - 1,029 - 7,325 7,960 7,285 CURRENT ASSETSTrade and other receivables 4,905 3,962 4,962Cash and cash equivalents (77) 2,551 584 4,828 6,513 5,546 TOTAL ASSETS 12,153 14,473 12,831 EQUITY AND LIABILITIES EQUITYCalled up share capital 4,107 3,800 3,816Capital redemption reserve 13,188 13,188 13,188Share based payment reserve 677 382 527Share premium account 22,014 21,471 21,505Translation reserve (20) (43) (18)Retained earnings (32,618) (29,906) (31,226)TOTAL EQUITY 7,348 8,892 7,792 CURRENT LIABILITIESTrade and other payables 4,805 5,574 5,039 NON-CURRENT LIABILITIESTrade and other payables - 7 - TOTAL LIABILITIES 4,805 5,581 5,039 TOTAL EQUITY AND LIABILITIES 12,153 14,473 12,831 The consolidated interim financial statements were approved by the board ofdirectors and signed on their behalf on 25 September 2007 Director Martin Chalmers Consolidated interim statement of changes in equity for the six months ended 30June 2007 Share Share Capital Share based Translation Retained Total capital premium redemption payment reserve earnings equity reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 As at 1 January 3,798 21,458 13,188 229 - (28,531) 10,1422006Changes in equityExchange difference - - - - (43) - (43)on translation offoreign operationsShare option grants - - - 153 - - 153 Net income - - - 153 (43) - 110recognised directlyin equityRetained loss for - - - - - (1,375) (1,375)the period Total recognised - - - 153 (43) (1,375) (1,265)income and expensefor the periodShares issued in the 2 13 - - - - 15period As at 30 June 2006 3,800 21,471 13,188 382 (43) (29,906) 8,892Changes in equityExchange difference - - - - 25 - 25on translation offoreign operationsShare option grants - - - 145 - - 145 Net income - - - 145 25 165recognised directlyin equityRetained profit for - - - - - (1,320) (1,295)period Total recognised - - - 145 25 (1,320) (1,130)income and expensefor the periodShares issued in the 16 34 - - - - 50period As at 31 December 3,816 21,505 13,188 527 (18) (31,226) 7,7922006 As at 31 December 3,816 21,505 13,188 527 (18) (31,226) 7,7922006Changes in equityExchange difference - - - - (2) - (2)on translation offoreign operationsShare option grants - - - 150 - - 150 Net income - - - 150 (2) - 148recognised directlyin equityRetained profit for - - - - - (1,392) (1,392)periodShares issued in the 291 509 - - - - 800period As at 30 June 2007 4,107 22,014 13,188 677 (20) (32,618) 7,348 Consolidated interim cash flow statement for the six months ended30 June 2007 6 months 6 months Year to to 30 Jun 07 to 30 Jun 06 31 Dec 06 £'000 £'000 £'000Operating activities Loss before tax (1,392) (680) (889) Depreciation 166 161 328Amortisation 136 87 202 (12) (10) (16)Share based payment 150 153 298Loss on sale of property plant and equipment - - 44Decrease/(increase) in receivables 57 462 (538)(Decrease)/increase in payables (212) 1,270 470Tax credit - (3) (3) Net cash flow from operations (1,107) 1,440 (104) Investing activities Purchase of property, plant and equipment (66) (147) (396)Purchase of associate (76) - (119)Sale of associate - 32 32Purchase of intangible assets (201) (416) (642)Interest received 14 10 27Interest paid (3) - (11) Net cash used in investing activities (332) (521) (1,109) (1,439) 919 (1,213) Financing activities Issue of ordinary share capital 800 16 203Capital element of finance lease payments - (43) (43)Repayment of loan notes (22) (23) (45) Net cash generated from financing activities 778 (50) 115 Net (decrease)/increase in cash and cash equivalents (661) 869 (1,098) Cash and cash equivalents at start of period 584 1,682 1,682 Cash and cash equivalents at end of period (77) 2,551 584 Notes to the condensed consolidated interim financial statements for the sixmonths to 30 June 2007 1 GENERAL INFORMATION Deal Group Media plc and its subsidiaries ('the Group') are principally engagedin the provision of online marketing services including performance basedmarketing, search engine positioning and optimisation and the sale ofadvertising space. Deal Group Media plc is the Group's ultimate parent company. It is incorporatedin England and Wales and its shares are listed on the AIM market of the LondonStock Exchange. These consolidated interim financial statements have been approved for issue bythe Board of Directors on 25 September 2007. The financial information set out in this interim report does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. TheGroup's statutory financial statements for the year ended 31 December 2006,prepared under UK GAAP, have been filed with the Registrar of Companies. Theauditor's report on those financial statements was unqualified and did notcontain a statement under Section 237 (2) of the Companies Act 1985. 2. BASIS OF PREPARATION The consolidated interim financial statements are for the six months ended 30June 2007. They have been prepared in accordance with IAS34 "Interim Financial reporting"and the requirements of IFRS 1 "First time adoption of International FinancialReporting Standards" applicable to interim reports. They do not include all ofthe information required for full financial statements and should be read inconjunction with the consolidated financial statements of the Group for the yearended 31 December 2006. These consolidated interim financial statements have been prepared in accordancewith the accounting policies set out below which are based on the recognitionand measurement principles of IFRS in issue and are effective at 30 June 2007 orexpected to be adopted and effective at 31 December 2007 our first annualreporting date at which it is required to use IFRS accounting standards. Deal Group Media plc's consolidated financial statements were prepared inaccordance with UK GAAP until 31 December 2006. The transition date to IFRS was1 January 2006. The comparative figures in respect of 2006 have been restated toreflect changes in accounting policies as a result of adoption of IFRS. Thedisclosures required by IFRS concerning the transition from UK GAAP to IFRS aregiven in the reconciliation schedules, presented and explained in note 9. The accounting policies have been applied consistently throughout the Group forthe purposes of preparation of these statements. 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation Subsidiaries Subsidiaries are entities that are directly or indirectly controlled by the DealGroup Media plc. Control exists where Deal Group Media plc has the power togovern the financial and operating policies of the entity so as to obtainbenefits from its activities. In assessing control, potential voting rights thatare currently exercisable or convertible are taken into account. The purchase method of accounting is used to account for the acquisition ofsubsidiaries by the Group. The cost of an acquisition is measured as the fairvalue of the assets given, equity instruments issued liabilities incurred orassumed at the date of exchange, plus costs directly attributable to theacquisition. Revenue recognition Revenue is measured by reference to fair value of the total amount receivable bythe Group for goods supplied and services provided, excluding VAT. Income for services which are provided over a period of time are invoiced inadvance and deferred and recognised in the period in which the services areprovided. Income from other services and products is recognised at the point of sale andwhen any obligation has been fulfilled. Intangible assets Goodwill Goodwill represents the excess of the fair value attributed to the cost ofinvestments in businesses or subsidiary undertakings over the fair value of theidentifiable net assets at the date of their acquisition. Goodwill is assessedannually for impairment and carried at cost less accumulated impairment losses.For the purpose of assessing impairment assets are grouped at the lowest levelsfor which there are separately identifiable cash flows. Software development Costs that are directly associated with the development of identifiable andunique software products controlled by the group, and that will probablygenerate economic benefits exceeding costs beyond one year are recognised asintangible assets and amortised over 4 years. Costs include software developmentemployee costs. Other development costs and all research costs are expensed asincurred. Property, plant and equipment Property, plant and equipment is recorded at cost less accumulated depreciation.Depreciation is calculated to write down the cost of all property, plant andequipment over their expected economic useful lives. The periods generally applicable are: Leasehold improvements Over the term of the leaseComputer equipment 33% - 50% per annumFixtures and fittings 25% per annumMotor vehicles 25% - 33% per annum Leases Assets held under finance leases and hire purchase contracts are capitalised inthe balance sheet and depreciated over their estimated useful economic lives. Alease is classified as a finance lease where the lessee bears substantially allthe risks and rewards related to the ownership of the leased asset. Theinterest element of leasing payments represents a constant proportion of thecapital balance outstanding and is charged to the profit and loss account overthe period of the lease. All other leases are regarded as operating leases andthe payments made under them are charged to the profit and loss account on astraight-line basis over the lease term. Financial instruments Financial assets and financial liabilities are recognised on the group's balancesheet when the group becomes a party to the contractual terms of the financialinstrument. Trade receivables do not carry any interest and are stated at their fair valueas reduced to equal the estimated present value of future cash flows. Trade payables are not interest bearing and are stated at their fair values. Bank borrowings on interest bearing loans and overdrafts are recorded at fairvalue on initial recognition. Finance charges are accounted for on an accrualsbasis using the effective interest rate method. Equity instruments issued by the group are recorded as the proceeds less directissue costs. Share capital represents the nominal value of equity shares.Share premium represents the excess of the fair value of the consideration overthe nominal value of equity shares issued. Translation reserve represents thedifferences arising from translation of investments in overseas subsidiaries.Share based payment reserve represents equity-settled share-based employeeremuneration until such share options are exercised. Capital redemption reserverepresents the nominal value of shares redeemed by the group. Financial assets designated available for sale are initially recognised at fairvalue. Subsequent to initial recognition they are measured at fair value withany changes to the carrying amount of the investment are recognised in equitythrough the statement of changes in equity. Cash and cash equivalents Cash and cash equivalents includes cash in hand, other short term highly liquidinvestments and bank overdrafts. Foreign currencies Foreign currency transactions are recorded in local currency at current exchangerates. Monetary assets and liabilities denominated in foreign currencies at theperiod end are translated at the period end exchange rate. Non-monetary itemsare measured at historical cost at the rate of exchange at the date of thetransaction. Foreign currency gains and losses are credited or charged to theprofit and loss account as they arise. The profit and loss accounts of overseassubsidiary undertakings are translated into pounds sterling at average exchangerates and the period end net assets of these companies are translated at periodend exchange rates. The exchange differences arising from the translation of the opening netinvestment in subsidiary undertakings are taken directly to translation reserve.On disposal cumulative translation differences are transferred to the incomestatement as part of the gain or loss on disposal. Non current assets classified as held for sale Assets held for sale include assets that the group intends and expects to sellwithin one year from the date of classification as held for sale. Assetsclassified as held for sale are measured at the lower of their carrying amountsimmediately prior to their classification as held for sale and their fair valueless costs to sell. Assets classified as held for sale are not subject todepreciation or amortisation. Employee benefits The Company pays contributions to a defined contribution plan. The pension costscharged against profits represents the amount of the contributions payable tothe scheme in respect of the accounting period. Share-based payment Share based payment that is within the scope of IFRS2 have been recognised inthe financial statements in accordance with that standard. All goods and services received in exchange for the grant of any share-basedpayment are measured at their fair values. Where employees are rewarded usingshare-based payment, the fair values of employees' services are determinedindirectly by reference to the fair value of the instrument granted to theemployee. This fair value is appraised at the grant date and excludes the impactof non-market vesting conditions (for example, profitability and sales growthtargets). All equity-settled share-based payment is ultimately recognised as an expense inthe income statement with a corresponding credit to equity. If vesting periods or other non-market vesting conditions apply, the expense isallocated over the vesting period, based on the best available estimate of thenumber of share options expected to vest. Estimates are subsequently revised ifthere is any indication that the number of share options expected to vestdiffers from previous estimates. Any cumulative adjustment prior to vesting isrecognised in the current period. No adjustment is made to any expenserecognised in prior periods if share options ultimately exercised are differentto that estimated on vesting. Upon exercise of share options the proceedsreceived net of attributable transaction costs are credited to share capital,and where appropriate share premium. During the six months to June 2007, £150,000 was charged to the income statementin respect of equity settled transactions (2006: £153,000). This expense wasbased on the fair value of share based payment transactions when contracted. Allof the expense arose under employee share awards made within the Group's rewardstructures. Fair values of share options/awards, measured at the date of the grant of theoption/award, are calculated using a binomial model methodology. Taxation Current tax is the tax currently payable based on taxable profit for the year. Deferred income taxes are calculated using the liability method on temporarydifferences. Deferred tax is generally provided on the difference between thecarrying amounts of assets and liabilities and their tax bases. However,deferred tax is not provided on the initial recognition of goodwill, nor on theinitial recognition of an asset or liability unless the related transaction is abusiness combination or affects tax or accounting profit. Deferred tax ontemporary differences associated with shares in subsidiaries and joint venturesis not provided if reversal of these temporary differences can be controlled bythe group and it is probable that reversal will not occur in the foreseeablefuture. In addition, tax losses available to be carried forward as well asother income tax credits to the group are assessed for recognition as deferredtax assets. Deferred tax liabilities are provided in full, with no discounting. Deferredtax assets are recognised to the extent that it is probable that the underlyingdeductible temporary differences will be able to be offset against futuretaxable income. Current and deferred tax assets and liabilities are calculatedat tax rates that are expected to apply to their respective period ofrealisation, provided they are enacted or substantively enacted at the balancesheet date. Changes in deferred tax assets or liabilities are recognised as a component oftax expense in the income statement, except where they relate to items that arecharged or credited directly to equity (such as the revaluation of land) inwhich case the related deferred tax is also charged or credited directly toequity. 4 SEGMENTAL INFORMATION Turnover is attributable to the principal activity, which is mainly carried outin the United Kingdom, Europe and Australia. An analysis of turnover and operating loss by geographical market is givenbelow: Turnover Operating (loss)/profit 2007 2006 2007 2006 £'000 £'000 £'000 £'000 United Kingdom 6,169 9,680 75 296Overseas 3,612 3,144 (102) 292Central costs - - (1,377) (1,278) 9,781 12,824 (1,404) (690) No segmental analysis of net assets has been provided, as the assets andliabilities attributable to overseas sales are not separately identified. 5. TAXATION There is no current tax charge for the year. An explanation of the tax positioncompared to the Group's reported results is set out below: 6 months 6 months Year to to 30 Jun 07 to 30 Jun 06 31 Dec 06 £'000 £'000 £'000 Foreign tax - - (82)Deferred tax - (695) (1,724) Current tax charge for the period - (695) (1,806) 6 SEASONAL FLUCTUATIONS The business of Deal Group Media plc is subject to seasonal fluctuations, withstronger demand for services in the second half of the year. 7 LOSS PER SHARE The calculation for the basic loss per share is based upon the loss attributableto ordinary shareholders divided by the weighted average number of shares inissue during the period. Reconciliation of the loss and weighted average number of shares used in thecalculations are set out below: 6 months 6 months Year to to 30 Jun 07 to 30 Jun 06 to 31 Dec 06 Loss on ordinary activities after tax (£'000) (1,392) (1,375) (2,695) Weighted average number of shares 405,695,354 380,029,031 380,831,210 Amount of loss per share in pence (0.34) (0.36) (0.71) In view of the loss for the period, options have no dilutive effect 8 SHARE ISSUE During the period the company issued 29,090,909 1p ordinary shares for 2.75peach. 9 EXPLANATION OF TRANSITION TO IFRS As stated in Note 2, these are the Group's first consolidated interim financialstatements for part of the period covered by the first IFRS annual consolidatedfinancial statements. This transition has affected the Group's reported financial position, financialperformance and cash flows as set out below: Reconciliation of equity at 1 January 2006, 30 June 2006 and 31 December 2006 The effect of the changes to the Group's accounting policies on the equity ofthe Group as at the date of transition, 1 January 2006, 30 June and 31 December2006, were as follows: 1 January 2006 Reported Intangible Set up costs Restated under assets under Note UK GAAP IAS 38 IFRS £'000 £'000 £'000 £'000ASSETSNON CURRENT ASSETSProperty, plant and equipment 647 (123) - 524Intangible assets 1,2,3 5,857 332 (21) 6,168 6,504 209 (21) 6,692 CURRENT ASSETSTrade and other receivables 4,426 - - 4,426Deferred tax 1,724 - - 1,724Cash and cash equivalents 1,682 - - 1,682 7,832 - - 7,832 TOTAL ASSETS 14,336 209 (21) 14,524 EQUITY AND LIABILITIES EQUITYCalled up share capital 3,798 - - 3,798Capital redemption reserve 13,188 - - 13,188Share based payment reserve 229 - - 229Share premium account 21,458 - - 21,458Retained earnings 1,2,3 (28,719) 209 (21) (28,531)TOTAL EQUITY 9,954 209 (21) 10,142 CURRENT LIABILITIESTrade and other payables 4,317 - - 4,317 NON-CURRENT LIABILITIESTrade and other payables 65 - - 65 TOTAL LIABILITIES 4,382 - - 4,382 TOTAL EQUITY AND LIABILITIES 14,336 209 (21) 14,524 30 June 2006 Reported Intangible Set up costs Restated under assets under Note UK GAAP IAS 38 IFRS £'000 £'000 £'000 £'000ASSETSNON CURRENT ASSETSProperty, plant and equipment 531 (72) - 459Intangible assets 1,2,3 5,443 1,048 (19) 6,472 5,974 976 (19) 6,931 CURRENT ASSETSTrade and other receivables 3,962 - - 3,962Deferred tax 1,029 - - 1,029Cash and cash equivalents 2,551 - - 2,551 7,542 - - 7,542 TOTAL ASSETS 13,516 976 (19) 14,473 EQUITY AND LIABILITIES EQUITYCalled up share capital 3,800 - - 3,800Capital redemption reserve 13,188 - - 13,188Share based payment reserve 382 - - 382Share premium account 21,471 - - 21,471Retained earnings 1,2,3 (30,906) 976 24 (29,906)Translation reserve - - (43) (43)TOTAL EQUITY 7,935 976 (19) 8,892 CURRENT LIABILITIESTrade and other payables 5,574 - - 5,574 NON-CURRENT LIABILITIESTrade and other payables 7 - - 7 TOTAL LIABILITIES 5,581 - - 5,581 TOTAL EQUITY AND LIABILITIES 13,516 976 (19) 14,473 31 December 2006 Reported Intangible Set up costs Restated under assets under Note UK GAAP IAS 38 IFRS £'000 £'000 £'000 £'000ASSETSNON CURRENT ASSETSProperty, plant and equipment 582 (79) - 503Intangible assets 1,2,3 5,014 1,633 (17) 6,630Available for sale financial assets 171 (19) - 152 5,767 1,539 (17) 7,285 CURRENT ASSETSTrade and other receivables 4,962 - - 4,962Cash and cash equivalents 584 - - 584 5,546 - - 5,546 TOTAL ASSETS 11,313 1,539 (17) 12,831 EQUITY AND LIABILITIES EQUITYCalled up share capital 3,816 - - 3,816Capital redemption reserve 13,188 - - 13,188Share based payment reserve 527 - - 527Share premium account 21,505 - - 21,505Retained earnings 1,2,3 (32,762) 1,535 1 (31,226)Translation reserve - - (18) (18)TOTAL EQUITY 6,274 1,535 (17) 7,792 CURRENT LIABILITIESTrade and other payables 5,039 - - 5,039 NON-CURRENT LIABILITIESTrade and other payables - - - - TOTAL LIABILITIES 5,039 - - 5,039 TOTAL EQUITY AND LIABILITIES 11,313 1,535 (21) 12,831 Reconciliation of income statement at 30 June and 31 December 2006 The effect of the changes to the Group's accounting policies on the incomestatement of the Group as at 30 June and 31 December 2006, were as follows: 30 June 2006 Reported IAS 38 Reported under UK under IFRS GAAP £'000 £'000 £'000 Revenue 12,824 - 12,824Cost of sales (9,322) - (9,322) GROSS PROFIT 3,502 - 3,502 ADMINISTRATIVE EXPENSES - Amortisation (575) 488 (87) - Depreciation (187) 26 (161) - Share based payments (153) (153) - Other administrative expenses (4,088) 297 (3,791) (5,003) 811 (4,192) LOSS FROM OPERATIONS (1,501) 811 (690) NET INTEREST INCOME 10 - 10 (LOSS)/PROFIT BEFORE TAX (1,491) 811 (680) Taxation (695) - (695) TOTAL LOSS AFTER TAXATIONFOR PERIOD FROM CONTINUING OPERATIONS (2,186) 811 (1,375) 31 December 2006 Reported IAS 38 Reported under UK under IFRS GAAP £'000 £'000 £'000 Revenue 22,965 - 22,965Cost of sales (15,828) - (15,828) GROSS PROFIT 7,137 - 7,137 ADMINISTRATIVE EXPENSES - Amortisation (1,010) 808 (202) - Depreciation (385) 57 (328) - Share based payment (298) - (298) - Other administrative expenses (7,697) 483 (7,214) (9,390) 1,348 (8,042) LOSS FROM OPERATIONS (2,253) 1,348 (905) NET INTEREST INCOME 16 - 16 LOSS BEFORE TAX (2,237) 1,348 (889) Taxation (1,806) - (1,806) TOTAL LOSS AFTER TAXATIONFOR PERIOD FROM CONTINUING OPERATIONS (4,043) 1,348 (2,695) 1. The adoption of IFRS requires that goodwill be frozen at the date of transition, as at 1st January 2006 the value was frozen at £5,857,000. The effect of the above is to add back the amortisation charge by £573,000 at 30 June 2006 and £1,006,000 at 31 December 2006. An impairment review was undertaken at the date of transition and at 31 December and there was no indication of impairment, the directors consider that no adjustment was necessary with respect to goodwill. 2. Under UK GAAP the Group applied a policy of expensing all development costs. Under IFRS where costs incurred in the development phase of a project meet the criteria in IAS 38 they must be capitalised. Management have reviewed the various development projects undertaken by the Group and ascertained that the costs of the dgmPro and Integra projects meet the capitalisation criteria. The impact on the opening transition balance sheet was to increase intangible assets by £209,000. At 30 June 2006 the effect was to increase intangible assets by a further £254,000 and charge amortisation of £60,000. At 31 December 2006 the effect was to increase intangible assets by £484,000 and charge amortisation of £145,000. 3. Start up costs capitalised under UK GAAP are to be charged to the profit and loss account under IFRS. At 1 January 2006 £21,000 of set up costs were removed from goodwill. Amortisation charges of £2,000 for the period to 30 June 2006 and £4,000 in the period to 31 December 2006 have been reversed. 4. Under UK GAAP the results of foreign operations were translated at the closing rate, under IFRS the results are translated at average rate. The exchange difference on translation is £43,000 at 30 June 2006 and £18,000 at 31 December 2006. The group has taken advantage of the exemption in IFRS1 and has deemed cumulative translation differences for all foreign operations to be nil at the date of transition to IFRS. 5. IFRS 1 permits companies adopting IFRS for the first time to apply certain exemptions from the full requirements of IFRS in the transition period. These interim financial statements have been prepared on the basis of taking the following exemption: • Business combinations prior to 1 January 2006, the Group's date oftransition to IFRS have not been restated to comply with IFRS 3 BusinessCombinations. Goodwill of £5,813,000 on business combinations prior to this datehas been frozen at their UK GAAP carrying value as at 1 January 2006. The cumulative effect of the above on retained earnings are as follows 1 January 30 June 31December 2006 2006 2006 £'000 £'000 £'000 Goodwill - 573 1,006Development costs capitalised 209 463 693Development costs amortisation - (60) (145)Set up costs (21) (21) (21)Set up amortisation - 2 4Translation reserve - 43 18Loss of associate - - (19) 188 1,000 1,536 -Ends- This information is provided by RNS The company news service from the London Stock Exchange