Volvere Regulatory News (VLE)

Volvere plc

("Volvere" or the "Group")

Final Results for the year ended 31 December 2011

Volvere plc (AIM:VLE), the turnaround investment company, announces its final results for the year ended 31 December 2011.

Highlights

Chairman's statement

I am pleased to report on the results for the year ended 31 December 2011.

The operating performance of our subsidiaries was satisfactory although not as strong overall as in prior periods. This is not surprising given the nature of turnaround investing and the weak economic climate. However despite this, we have managed to grow the net assets per share to a record £3.63. I remain confident that the skills of your management team are well-suited to the challenges and opportunities ahead, and will enable the Company to create value for its shareholders.

David Buchler

Chairman

22 May 2012

For further information:

Chief Executive's statement

Introduction

As the Chairman noted in his statement, continued growth in net assets per share is encouraging despite the economic headwinds in the UK. In July 2011, we invested in a new sector - food manufacturing - partly because it is one of the few areas where demand tends to remain resilient. Our treasury investments have also made a good contribution in very volatile markets.

Operating review

During the year the Group operated in three segments: online marketing & data services, security solutions and food manufacturing, the latter segment being added on acquisition of Shire Foods Limited. The financial performance of each segment is summarised below and in the financial review on pages 5 to 7 and further detailed in note 5 to the financial statements.

Online marketing & data services

Our online marketing and data services business, Interactive Prospect Targeting Limited ("IPT"), produced revenue and profit before interest, tax and amortisation of £8.3 million and £0.15 million respectively (2010: £8.5 million and £1.1 million). Revenue was only slightly below the prior year however there were significantly lower sales of IPT's own data throughout the year. This activity normally has the highest margin and the shortfall meant the resultant profit was below our expectations at the beginning of the year.

Investment in a new quiz site "Quizfactor" has continued and revenues are expected from Q4 2012. The new site should diversify the company's product offering andwe expect to see further innovation from the company in 2012.

We are grateful to the management and staff for their continued hard work in making IPT the UK market leader in customer lead generation.

The total cash received by way of loan repayments and dividends from IPT since acquisition in 2008 stands at £2.90 million compared with an original investment cost of £1.4 million.

Security solutions

Sira Defence & Security had a positive year completing several client projects and continuing to increase penetration of SiraView, its digital CCTV viewing software. Revenue for the year was £0.6 million (2010: £0.5 million) with profit before interest and tax of £0.1 million (2010: £0.04 million). However, since the beginning of 2012, the impact of public sector funding cuts has meant that new orders have not been forthcoming at previous levels. We have reduced our fixed costs and are currently considering how best to exploit the value in this business going forward.

Food manufacturing

On 29 July 2011 the Group acquired a 54% stake in Shire Foods Limited ("Shire"), which was further increased to 80% at the year end, for a total consideration of £0.5 million. In addition to this investment, the Group made loans to Shire in the period totalling £0.7 million. The investment and loans were made to enable Shire to repay some bank debt and to cover trading losses whilst a turnaround plan was implemented. Revenue and loss before interest and tax for the five months from August to December 2011 were £3.3 million and £0.6 million respectively.

In order to reduce the losses and lay the foundations for a return to profitability, Shire's business was restructured significantly during the period and a number of customer and product changes have been implemented which are expected to benefit the business going forward. The business is still dependent on a relatively small number of large clients and there is more work to be done. However, with better product offerings, increased customer focus and more efficient manufacturing, Shire's performance can be further improved.

Cash and investments

At the year end the Group had cash of £4.3 million (2010: £3.1 million) and a total of £12.0 million (at cost) (2010: £16.4 million) invested in available for sale investments, with a valuation of £12.0 million (£17.8 million). Since year-end we disposed of all of our equity investments and some of our investment grade bonds and bank preference share holdings. These disposals were made at prices in excess of our book cost and above the prices at the end of 2011.

Acquisitions and future strategy

Our current investments remain relatively stable against the backdrop of a difficult economic environment. The quantity of dealflow that we receive remains satisfactory and our balance sheet is strong. However, the timing of future investments will depend upon our ability to source quality opportunities whilst being mindful of not anticipating an economic rebound that may in fact be some time ahead.

Jonathan Lander

Chief Executive

22 May 2012

Financial review

This financial review covers the Group's performance for the year ended 31 December 2011. It should be read in conjunction with the Chairman's and Chief Executive's statements.

Accounting policies and basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The Group's accounting policies are set out in note 1 to the preliminary announcement.

Revenue and operating performance

Detailed information about the Group's segments is set out in note 5 to this preliminary announcement and should be read in conjunction with this financial review.

Total revenue from continuing operations was £12.2 million (2010: £9.0 million). Of current year revenue £3.3 million is attributable to the acquired business, meaning that revenue from the Group's other businesses is consistent with the previous year. Revenue by segment is shown in note 5 to the preliminary announcement. Profit before tax was £1.2 million (2010: £0.9 million) which includes a £1.3 million gain on bargain acquisition of Shire Foods Limited.

Online marketing and data services

The Group's online marketing and data services segment consists of Interactive Prospect Targeting Limited and its subsidiary ("IPT"). IPT's revenue for 2011 as a whole fell slightly from £8.5 million in 2010 to £8.3 million in 2011. Profits before tax and interest fell from £1.14 million in 2010 to £0.15 million in 2011 principally due to lower sales of IPT's own data.

Security solutions

Revenue from security solutions increased by almost 20% to £0.56 million (2010: £0.47 million) due to the completion of a number of client projects, with a corresponding increase in profits from £0.04 million in 2010 to £0.10 million in 2011.

Food manufacturing

The Group's food manufacturing segments consists of Shire Foods Limited in which a majority stake was acquired during the year, as outlined in the Chief Executive's statement. The original equity investment was £0.5 million in cash for a 54% equity stake, with an additional £0.04 million subscribed for a further 26% holding, bringing the Group's total holding to 80%. The fair value of the net assets acquired was above the consideration paid and this has given rise to a gain on bargain acquisition of £1.3 million, all of which has been credited to the income statement in the period. The Group made loans to Shire in the period of £0.73 million, principally to finance trading losses. Information in relation to the business combination is given in note 28.

From the date of acquisition this segment contributed £3.3 million of revenues but incurred losses of £0.6 million. As noted in the Chief Executive's statement, actions have been taken to improve profitability and as part of a financial restructuring, Shire entered into a creditors' voluntary arrangement ("CVA") in January 2012. Under the terms of the CVA Shire is expected to pay £0.35 million over a maximum 3 year period in satisfaction of unsecured liabilities of approximately £1.2 million.

Investment revenues, other gains and losses and finance income and expense

Whilst continuing to review and assess further investments in trading activities, the Group had significant cash on hand and has continued with active treasury management in response to prevailing low interest rates. This strategy achieved investment revenues, other gains and losses and finance income net of finance costs totalling £1.2 million (2010: £1.2 million).

Statement of financial position

Property, plant & equipment, loans and finance leases

The Group's investment in Shire and the subsequent consolidation of it in these financial statements has resulted in large increases in several categories in the statement of financial position, particularly in respect of Shire's property and plant assets, coupled with its loans and finance lease creditors. All Shire debt is without recourse to the Group and an analysis of net debt is set out in note 18.

Cash and cash equivalents

Cash at the year end totalled £4.3 million (2010: £3.1 million). The Group's cash includes (by virtue of its full consolidation) £0.8 million (2010: £1.2 million) held in its 45% owned subsidiary, Interactive Prospect Targeting Limited. As noted below, the Group made purchases during the year of its own shares for treasury for a total consideration of £2.16 million.

Available for sale investments

At the year end the Group's available for sale investments had a market value of £12.0 million; the base cost of these investments was also £12.0 million.

Hedging

It is not the Group's policy to enter into derivative instruments to hedge interest rate risk. Certain of the investments are denominated in US dollars (base cost $4 million, valuation $4.3 million) and, in order to hedge the foreign exchange risk associated with those investments, the Group has entered into a foreign exchange contract for the sale of $4.25 million in December 2012 at a rate of $1.5579/£1. The difference between the foreign exchange contract rate and the spot rate has resulted in a credit to the income statement of £0.04 million in 2011 (2010: charge of £0.07 million).

Dividends

In accordance with the policy set out in the prospectus on admission to AIM, the Board does not currently intend to recommend payment of a dividend and prefers to retain profits as they arise for investment in future opportunities. During the year, however, Interactive Prospect Targeting Limited paid dividends totalling £0.55 million (2010: £0.77 million), of which £0.30 million (2010: £0.42 million) was paid to third party (i.e. non-Group) shareholders.

Purchase of own shares

The Group purchased for treasury a total of 767,564 shares (2010: 298,000 shares) for a total consideration of £2.16 million (2010: £0.88 million) representing an average price of £2.81 per share (2010: £2.95 per share).

Earnings per share

The basic and diluted earnings per ordinary share were 26.92p and 26.87p respectively (2010: 19.44p and 19.39p). During the year the Company continued the operation of a share option scheme in which certain staff are entitled to participate, subject to the scheme's terms and conditions.

Key performance indicators

The Group uses key performance indicators suitable for the nature and size of the Group's businesses. These are primarily monthly reports of profitability, levels of working capital and workload. In the online marketing and data services segment, the Group monitors traffic statistics both in terms of yield and cost as well as overall profitability. In respect of the food manufacturing sector order intake, manufacturing output and sales are monitored weekly and reported monthly. Order intake is monitored weekly and reported monthly in respect of the security solutions segment. The segmental analysis in note 5 to this preliminary announcement summarises the performance of each segment.

Risk factors

The Company and Group face a number of specific business risks that could affect the Company's or Group's success. The Company and Group invests in distressed businesses and securities, which by their nature, often carry a higher degree of risk than those that are not distressed. The Group's businesses are principally engaged in the provision of services that are dependent on the continued employment of the Group's employees and availability of suitable, profitable workload. In addition, the online marketing and data services segment is particularly dependent on IT systems and infrastructure, the unavailability of which could impact the Group materially. In the food manufacturing segment, there is a dependency on a small number of customers. A reduction in the volume or range of products supplied to those customers or the loss of any one of them could impact the Group materially. More information on the Group's financial risks is disclosed in note 17 to the preliminary announcement.

Nick Lander

Chief Financial & Operating Officer

22 May 2012

Consolidated income statement for the year ended 31 December 2011

Consolidated statement of comprehensive income for the year ended 31 December 2011

Consolidated statement of changes in equity for the year ended 31 December 2011

Consolidated statement of financial position as at 31 December 2011

Consolidated statement of cash flows for the year ended 31 December 2011

Notes forming part of the preliminary announcement for the year ended 31 December 2011

The financial information set out above, which was approved by the Board on 21 May 2012, is derived from the full Group accounts for the year ended 31 December 2011 and does not constitute the statutory accounts within the meaning of section 434 of the Companies Act 2006. The Group accounts on which the auditors have given an unqualified report, which does not contain a statement under section 498(2) or (3) of the Companies Act 2006 in respect of the accounts for 2011, will be delivered to the Registrar of Companies in due course.

Copies of the financial statements will be sent to shareholders shortly and will be available from the Company's registered office, York House, 74-82 Queen Victoria Street, London, EC4N 4SJ and website at www.volvere.co.uk.

1 Accounting policies

Basis of accounting

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS and IFRIC interpretations) as adopted by the European Union ("adopted IFRS") and with those parts of the Companies Act 2006 applicable to companies preparing their accounts under adopted IFRS. The Company has elected to prepare its Parent Company financial statements in accordance with UK Generally Accepted Accounting Practice ("UK GAAP"); these are presented on pages 44 to 50.

Going concern

The Groups' business activities, together with the factors likely to affect its future development, performance and position are set out in the Business Review and the financial position of the company, its cash flows and liquidity position are set out on pages 3 to 7. In addition, note 16 to the financial statements includes the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.

The Group has considerable financial resources and operates in a number of different market sectors. As a consequence, the directors believe that the group is well placed to manage the business risks inherent in the Group's activities despite the current uncertain economic outlook.

The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

The following principal accounting policies have been applied consistently, in all material respects, in the preparation of these financial statements:

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. 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 acquired or 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. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Business combinations

The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred.

The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquiree's financial statements prior to the acquisition. Assets acquired and liabilities assumed are measured at their acquisition-date fair values.

Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of a) fair value of consideration transferred, b) the recognised amount of any non-controlling interest in the acquiree and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (ie gain on a bargain purchase) is recognised in income immediately.

The purchase of a non-controlling interest is not a business combination within the scope of IFRS 3, since the acquiree is already controlled by its parent. Such transactions are accounted for as equity transactions, as they are transactions with equity holders acting in their capacity as such. No change in goodwill is recognised and no gain or loss is recognised in profit or loss.

Goodwill

Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognised. See above for information on how goodwill is initially determined. Goodwill is carried at cost less accumulated impairment losses.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes.

The Group generates revenues from the provision of online marketing and data services. Revenue from the sale of services is recognised with reference to the stage of completion.

The Group generates revenues from food manufacturing. Sale of goods is recognised when the Group has transferred to the buyer the significant risks and rewards of ownership, generally when the customer has taken undisputed delivery of the goods. There are no service obligations attached to the sale of goods.

Revenue earned on time and materials contracts is recognised as costs are incurred. Income from fixed price contracts is recognised in proportion to the stage of completion, determined on the basis of work done, of the relevant contract.

Discontinued operations

Discontinued operations represent cash generating units or groups of cash generating units that have either been disposed of or classified as held for sale, and represent a separate major line of business or are part of a single co-ordinated plan to dispose of a separate major line of business. Cash generating units forming part of a single co-ordinated plan to dispose of a separate major line of business are classified within continuing operations until they meet the criteria to be held for sale. The post-tax profit or loss of the discontinued operation is classified as a single line on the face of the consolidated income statement, together with any post-tax gain or loss recognised on the re-measurement to fair value less costs to sell or on the disposal of the assets or disposal group constituting the discontinued operation. On changes to the composition of groups of units comprising discontinued operations, the presentation of discontinued operations within prior periods is restated to reflect consistent classification of discontinued operations across all periods presented.

Operating Segments

IFRS 8 "Operating Segments" requires the disclosure of segmental information for the Group on the basis of information reported internally to the chief operating decision-maker for decision-making purposes. The Group considers that the role of chief operating decision-maker is performed collectively by the board of Directors.

Volvere plc is a holding company that identifies and invests principally in undervalued and distressed businesses and securities as well as businesses that are complementary to existing Group companies. Its customers are based in the UK, Europe and the USA.

Financial information (including revenue and operating profits) is reported to the board on a segmental basis. Segment revenue comprises sales to external customers and excludes gains arising on the disposal of assets and finance income. Segment profit reported to the board represents the profit earned by each segment before the allocation of goodwill, amortisation, investment revenues, other gains and losses, finance expense and income and tax. For the purposes of assessing segment performance and for determining the allocation of resources between segments, the board reviews the non-current assets attributable to each segment as well as the financial resources available. All assets are allocated to reportable segments. Assets that are used jointly by segments are allocated to the individual segments on a basis of revenues earned.

All liabilities are allocated to individual segments. Information is reported to the board of directors on a segmental basis as management believes that each segment exposes the Group to differing levels of risk and rewards due to their varying business life cycles. The segment profit or loss, segment assets and segment liabilities are measured on the same basis as amounts recognised in the financial statements. Each segment is managed separately.

Leasing

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 statement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and the reduction of 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.

Foreign currencies

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting date. Gains and losses arising on retranslation are included in net profit or loss for the period.

Retirement benefit costs

The Group's subsidiary undertakings operate defined contribution retirement benefit schemes. Payments to these schemes are charged as an expense in the period to which they relate. The assets of the schemes are held separately from those of the relevant company and Group in independently administered funds.

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 reporting date.

Deferred tax is the tax expected to be payable or recoverable on temporary 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 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 reporting 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 measured on an undiscounted basis using the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Property, plant and equipment

Items of plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged so as to write off the cost or valuation of assets, less their residual values, over their estimated useful lives, using the straight line method, on the following bases:

Freehold property - 1.5% per annum

Improvements to short-term leasehold property - Over the life of the lease

Plant and machinery - 20%-33% per annum

Investments

Investments are recognised and derecognised on a trade date where a purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, including transaction costs. Available for sale current asset investments are carried at fair value with adjustments recognised in other comprehensive income.

Investment income

Income from investments is included in the income statement at the point the Group becomes legally entitled to it.

Impairment of tangible and intangible assets

At each reporting 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).

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 (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Share-based payments

The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value 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 options that will ultimately vest.

Fair value is measured by use of a Black-Scholes pricing 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.

Inventories

Inventories are stated at the lower of cost and net realisable value. Raw materials are valued at purchase price and the costs of ordinarily interchangeable items are assigned using a weighted average cost formula. The cost of finished goods comprises raw materials directly attributable to manufacturing process based on product specification and packaging cost. Net realisable value is the estimated selling price in the ordinary course of business less any applicable selling expenses.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances, overnight deposits and treasury deposits. The Group considers all highly liquid investments with original maturity dates of three months or less to be cash equivalents.

Financial assets

The Group classifies its financial assets into one of the following categories, depending on the purpose for which the asset was acquired. The Group's accounting policy for each category is as follows:

Fair value through profit or loss: This category comprises only in-the-money derivatives. They are carried in the statement of financial position at fair value with changes in fair value recognised in the income statement. The Group does not have any assets held for trading nor does it voluntarily classify any financial assets as being at fair value through profit or loss.

Loans and receivables: These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method less any provision for impairment.

Available-for-sale: Non-derivative financial assets not included in the above categories are classified as available-for-sale and comprise the Group's investments in entities not qualifying as subsidiaries, associates or jointly controlled entities. They are carried at fair value with changes in fair value recognised directly in other comprehensive income. Fair value is determined by reference to independent valuation statements provided by the investment manager or broker (as the case may be) through whom such investments are made. Where the underlying investments are exchange-traded, the mid-price of the investment is used.

Where a decline in the fair value of an available-for-sale financial asset constitutes objective evidence of impairment, the amount of the loss is removed from equity and recognised in the income statement.

Financial liabilities

The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired. The Group's accounting policy for each category is as follows:

Fair value through profit or loss: This category comprises only out-of-the-money derivatives. They are carried in the statement of financial position at fair value with changes in fair value recognised in the income statement.

Other financial liabilities: Other financial liabilities include the following items:

·; Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

·; Bank and other borrowings are initially recognised at the fair value of the amount advanced net of any transaction costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest method. "Interest expense" in this context includes initial transaction costs and premia payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

Financial liabilities and equity instruments

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.

The Group has in issue A and B shares which are convertible into Ordinary shares at the option of the shareholder based upon a formula contained in the Company's Articles of Association. The A and B shares do not have a cash alternative. However, because the shares convert into a variable number of ordinary shares, dependent inter alia on the share price of the ordinary shares in issue, the terms of IAS 32 "Financial Instruments Presentation" require them to be classified as debt. The instrument is classified as an amortised cost liability and carried at its settlement amount, which approximates fair value. Movements in settlement amount re-estimation are recorded in profit or loss.

Critical accounting judgements and key sources of estimation uncertainty

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The nature of the Group's business is such that there can be unpredictable variation and uncertainty regarding its business. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The critical judgements and key sources of estimation uncertainty that have a significant impact on the carrying value of assets and liabilities are discussed below:

Deferred tax asset

The Group recognises a deferred tax asset in respect of temporary differences relating to capital allowances, revenue losses and other short term temporary differences when it considers there is sufficient evidence that the asset will be recovered against future taxable profits.

Current asset investments

Declines in the fair value of current asset investments are considered for indicators of impairment. Where the decline in value is significant or prolonged the asset may be considered to be impaired with the resulting impairment losses recognised in the income statement. Short term and insignificant declines in fair value that are considered to be temporary are reflected in equity. The current year decline in fair value is considered temporary.

Development expenditure

All development expenditure incurred by the Group is assessed against the criteria set out in IAS 38 ''Intangible Assets'' to determine the appropriate treatment. The Group has invested in the development of a new website in the online marketing & data service segment. The directors are of the view that the development expenditure incurred in respect of it does not meet the recognition criteria for an intangible asset within IAS 38 and therefore the cost has been expensed in the income statement.

Revenue recognition

Due to the nature of some services provided by certain of the Group's businesses the recoverability of receivables can be subject to some uncertainty. Whilst the Group has a thorough process for reviewing the requirement for receivables and credit note provisions, this area is inherently subjective.

New standards and interpretations

During the year, a number of new standards and interpretations have come into force and hence have been adopted by the Group. The adoption of these standards/interpretations has had no material effect on the Group's financial statements. The IASB have issued the following standards which are in issue but not yet effective:

·; Amendments to IAS 12 Income Taxes - Deferred Tax: Recovery of Underlying Assets

·; IFRS 9 Financial Instruments

·; IFRS 10 Consolidated Financial Statements

·; IFRS 11 Joint Arrangements

·; IFRS 12 Disclosure of Interests in Other Entities

·; IFRS 13 Fair Value Measurement

The amendments to IAS 12 are effective 1 July 2012. IFRS 9 is effective 1 January 2015 and IFRS 10 to IFRS 13 are effective 1 January 2013. The Group does not anticipate that the adoption of these standards and amendments will have a material effect on its financial statements on initial adoption.

2 Operating profit

Operating profit is stated after charging/(crediting):

3 Staff costs

The average number of employees (including Directors) in the Group was as follows:

4 Directors' remuneration

The remuneration of the directors was as follows:

The services of Jonathan Lander and Nick Lander are provided under the terms of a Service Agreement with Dawnay, Day Lander Limited. The amount due under this agreement, which is in addition to the amounts disclosed above, for the year amounted to £427,000 (2010: £502,000). In addition, the amount paid to David Buchler in the year was to a third party on an invoice basis. None of the directors were members of the Group's defined contribution pension plan in the year (2010: none).

5 Operating segments

All revenue arose through services rendered in the principal activities of online marketing & data services, food manufacturing, security solutions and investing and management services.

Analysis by business segment:

Statement of financial position (excluding inter segment balances):