Volvere Regulatory News (VLE)

2 May 2006 07:02

Volvere PLC02 May 2006 2 May 2006 VOLVERE PLC FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 Volvere plc ('Volvere' or 'the Company'), the turnaround investment company, announces its final results for the year ended 31 December 2005. HIGHLIGHTS •Expansion of both operating and investment activities •Increased stake in NMT Group PLC ("NMT") to 26.05% at year-end with successful election of three Volvere directors to board of NMT Group PLC •Core areas at Vectra performed strongly •Entered test and certification market with acquisition of Sira Test and Certification ("Sira") in September 2005 •Sira made £107,000 profit before tax, goodwill (£16,000) and group management and service charges (£84,000) in the 3 months following acquisition with current trading suggesting that this will be maintained •Further acquisition made post year-end •Group is well placed to create and seize new opportunities in the year ahead •Group turnover in the year: £10,626,000 (2004: £10,501,000) •Group loss before tax: £63,000 (2004: loss £211,000) •Group net assets: £4.09m (2004: £3.84m) •Basic and diluted loss per share 1.64p (2004: loss 5.82p) CHAIRMAN'S STATEMENT I am pleased to report on the results for the year ended 31 December 2005. Last year I reported that the changes we made to Vectra's management followingthe turnaround would free Group management from Vectra's day-to-day operationsand permit an increased focus on originating follow-on corporate transactions.As a result 2005 saw us increase our investment in NMT Group PLC and theappointment of three Volvere directors to the NMT board. In addition, wecompleted the acquisition of Sira Test and Certification and, following the yearend, completed a further complementary acquisition. OUTLOOK Trading in Vectra remains stable, Sira is performing strongly and I amencouraged by the further acquisitions made in 2006. I believe the Group is wellplaced to create and seize new opportunities in the year ahead. Lord Kalms of EdgwareChairman28 April 2006 For further information, please contact: Jonathan Lander, Chief Executive OfficerVolvere plc + 44 (0) 20 7979 7596 Terry GarrettWeber Shandwick Square Mile + 44 (0) 20 7067 0700 Jeff KeatingTeather & Greenwood + 44 (0) 20 7426 9000 CHIEF EXECUTIVE'S STATEMENT I am pleased to report that 2005 saw the Group expand both its operating and investment activities. In pursuit of the strategy set out when Volvere was admitted to AIM, we increased our stake in NMT Group PLC ('NMT'), a company that we considered to have a poor financial performance and where an activist investor such as Volvere could bring about a change of management and enhance value for shareholders. As a result, over the period and continuing we increased our stake in NMT and were successful in removing that company's board with the support of like-minded shareholders. At the year end we controlled 26.05% of NMT and have subsequently increased this to 29.9%. On 29 September 2005 we acquired Sira Test and Certification ('Sira'), a businesswhich is complementary to our existing subsidiary, Vectra. Sira's services are driven by UK and European legislation for improving safety in hazardous environments. Since the year end we have also acquired a further certification business (known as Sira Environmental) operating in the environmental market and a software development and security solutions business. We are intending to create value through NMT, Vectra and both Sira businesses. OPERATING REVIEW Vectra Vectra's turnover for the year ended 31 December 2005 was £9,898,000 (2004: £10,501,000), which was lower than we had anticipated due principally to a reduction in volumes in our Property consulting business. As a result we scaled back our activities in that area accordingly. I am pleased to report that each of our core areas enjoyed a productive year. Our Nuclear business delivered a robust performance with workflows becoming more predictable in the second half of the year. Our Oil and Gas business performed well with the high oil price continuing to stimulate investment in the oil sector. The Transportation business, which serves principally United Kingdom and Dutch clients, performed well. Our expectation is that each of these businesses willperform strongly in 2006 and we are recruiting further consulting staff to support growth. Sira Test and Certification During the year we entered the product and personnel certification market withour purchase of Sira Test and Certification ("Sira") for a consideration of£1.4m, of which £1.1m was payable in cash and £0.3m in shares. Sira operates inthe highly regulated potentially explosive atmosphere market, certifyingproducts for use in such environments, the manufacturing processes therein andthe personnel operating them. We believe this business is capable of growth andwe have opened a second office in the United Kingdom as part of our strategy toachieve that. I am pleased to report that Sira's turnover for the 3 months postacquisition was £658,000 and its operating profit before Group management andother service charges (which are provided by Vectra) and goodwill amortisationwas £107,000. This represents a significant contribution to the Group andcurrent trading suggests that this level of profitability will be broadlysustained. We have, since the year end, added to our certification activities through theacquisition of Sira Environmental, which provides monitoring and conformityassessment solutions to the water quality and emissions monitoring markets inrespect of both people and products. I am confident that our certificationactivities generally will enhance further our financial performancesignificantly. As part of the Sira Environmental acquisition we acquired asoftware development and security solutions business, Meerkat, which isdeveloping video management software for use by the security services. EMPLOYEES The level of professionalism, motivation and dedication of our staff continuesto be our strength in all our businesses. We remain committed to developing anenvironment where individuals are challenged and rewarded for their success. ACQUISITIONS AND FUTURE STRATEGY The investment in NMT is significant and we are focused on ensuring that this investment results in value for shareholders. Our acquisitions of Sira and Sira Environmental are an excellent platform for expanding our certification and similar activities and we are seeking complementary acquisitions to them. Vectrais beginning to shows early signs of growth and is operating in relatively robust market sectors. Accordingly, I am encouraged by the outlook for the Group. Jonathan LanderChief Executive28 April 2006 FINANCIAL REVIEW This Financial Review covers the Group's performance during the year ended 31 December 2005. It should be read in conjunction with the Chairman's and Chief Executive's statements. ACCOUNTING POLICIES AND BASIS OF PREPARATION The financial statements have been prepared in accordance with UK Generally Accepted Accounting Standards and the Group's principal accounting policies, which are set out in note 1 of the Notes to the Preliminary Announcement below. The Group has applied robust and transparent accounting policies throughout the year. The Group carries out regular reviews of its accounting policies in accordance with the requirement of Financial Reporting Standard ("FRS") 18 "Accounting Policies". TURNOVER AND OPERATING PERFORMANCE Turnover in the period was £10,626,000 (2004: £10,501,000) of which £658,000 arose from the acquisition of Sira Test and Certification ("Sira") in September 2005. The Group's operating loss of £159,000 was significantly lower than 2004 (loss £301,000) reflecting the contribution from Sira and lower central overheads coupled with management fees charged to the Group's associated undertaking for the provision of management services. The improved operating performance was offset partially by a reduced amount of negative goodwill realised relating to the Vectra acquisition of £24,000 (2004: £60,000) and after amortisation of goodwill relating to the Sira acquisition of £16,000 (2004: nil). The Group's loss before tax for the year was £63,000 (2004: loss £211,000). The increased shareholding in NMT Group PLC ("NMT") and the appointment of three Volvere directors to its board has resulted in that company becoming an associated undertaking with effect from 14 September 2005 and the Group's share of its operating loss, interest, exceptional items and tax for the period since that date are shown on the face of the Group's Profit and Loss Account. The fair value of the Group's share of the underlying net assets acquired in NMT was less than the cost of the investment and this has resulted in £135,000 of negative goodwill relating to this investment being realised on consolidation in the year (2004: nil). The gross margin for the Group as a whole was slightly improved at 46% for the year (2004: 45%), reflecting the contribution of Sira and the provision of management services to NMT. Margins in Vectra remained broadly constant between the first half and second half of the year and were 1% lower than 2004 as a whole. Vectra's operating loss before group management charges was £48,000 (2004: £43,000), stated after restructuring costs of £58,000 (2004: £98,000). Vectra's turnover was £9,898,000 (2004: £10,501,000) reflecting reduced activity in the property consulting business. Overhead costs were reduced overall and the effect of the reduced volumes was neutralised. The performance of Sira has been encouraging since the acquisition. In the three month period since the acquisition the business generated a profit before tax, goodwill and group management and other service charges (from Vectra) of £107,000. LOSS PER SHARE The basic and diluted loss per share was 1.64p (2004: 5.82p). During the year the Group continued the operation of a share option scheme in which all staff are entitled to participate, subject to certain conditions. NEGATIVE GOODWILL Negative goodwill arising on the acquisition of Vectra has been capitalised as an intangible asset and credited to the profit and loss account during the period in so far as the assets acquired have been consumed or realised as cash. In the year an amount of £24,000 (2004: £60,000) was credited to the profit and loss account. Negative goodwill arising on the consolidation of the Group's associated undertaking, NMT Group PLC, has been credited to the profit and loss account (£135,000; 2004: nil). POSITIVE GOODWILL Positive goodwill arising on the acquisition of Sira has been capitalised as anintangible asset during the period. In the period an amount of £1,301,000 wascapitalised. This is being amortised over 20 years, with a charge in the firstperiod following acquisition of £16,000. CASH MANAGEMENT During the year the Group refinanced its holding in NMT by entering into a Contract for Difference ("CFD"). The proceeds received from entering into the CFD, less the cash placed on deposit as security for the CFD provider, has been treated as debt. The overall debt position relating to this at the year end was £578,000. Cash balances at the year end totalled £1,144,000 (2004: £3,003,000) reflecting the investments made in NMT and the acquisition of Sira. HEDGING It is not the Group's policy to enter into derivative instruments to hedge interest rate risk. DIVIDENDS In accordance with the policy set out in our prospectus on our 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. Nick LanderChief Operating & Financial Officer28 April 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNTYear ended 31 December 2005 Continuing operations Note Total Year ended Year ended 31 December 31 December Existing Acquisitions 2005 2004 £000 £000 £000 £000 TURNOVER 2 9,968 658 10,626 10,501Cost of sales (5,524) (267) (5,791) (5,787) _____ _____ _____ _____ GROSS PROFIT 4,444 391 4,835 4,714Administrative expenses- before goodwill (4,694) (308) (5,002) (5,075)- realisation of negative goodwill 24 - 24 60- amortisation of positive goodwill - (16) (16) - _____ _____ _____ _____ (4,670) (324) (4,994) (5,015) _____ _____ _____ _____ OPERATING (LOSS)/PROFIT (226) 67 (159) (301) Share of operating loss in associate (89) -Negative goodwill arising in respect of associate 135 -Finance income - interest receivable- Group 59 90- share of associate 21 -Cost of fundamental reorganisation - share of associate 5 (30) - _____ _____LOSS ON ORDINARY ACTIVITIES BEFORE TAX 2 (63) (211)Tax on loss on ordinary activities 6 3 - _____ _____LOSS ON ORDINARY ACTIVITIES AFTER TAX, BEING LOSS FOR THE YEAR TRANSFERRED FROM RESERVES 17 (60) (211) ===== =====LOSS PER ORDINARY SHARE- Basic 8 (1.64p) (5.82p) _____ _____- Diluted 8 (1.64p) (5.82p) _____ _____ All results are derived from continuing operations. There are no recognised gains or losses other than the result for the current andpreceding financial years. Accordingly, no statement of total recognised gains and losses is given. BALANCE SHEET31 December 2005 2005 2004 Note Group Company Group Company £000 £000 £000 £000 FIXED ASSETSIntangible fixed assets- positive goodwill 9 1,285 - - -- negative goodwill 9 (66) - (90) -Tangible fixed assets 10 218 - 153 -Investments 11,12,13 1,535 3,619 192 2,316 _____ _____ _____ _____ 2,972 3,619 255 2,316CURRENT ASSETSDebtors 14 3,663 1,997 2,790 78Cash at bank and in hand 1,144 389 3,003 1,964 _____ _____ _____ _____ 4,807 2,386 5,793 2,042 CREDITORS: amounts falling due within one year 15 (3,688) (848) (2,208) (225) _____ _____ _____ _____NET CURRENT ASSETS 1,119 1,538 3,585 1,817 _____ _____ _____ _____TOTAL ASSETS LESS CURRENT LIABILITIES 4,091 5,157 3,840 4,133 ===== ===== ===== =====CAPITAL AND RESERVESCalled up share capital 16 50 50 50 50Share premium account 17 361 361 50 50Profit and loss account 17 3,680 4,746 3,740 4,033 _____ _____ _____ _____EQUITY SHAREHOLDERS' FUNDS 18 4,091 5,157 3,840 4,133 ===== ===== ===== ===== These financial statements were approved by the Board of Directors on 28 April2006. Signed on behalf of the Board of Directors Jonathan Lander Nick LanderDirector Director CONSOLIDATED CASH FLOW STATEMENTYear ended 31 December 2005 Note 2005 2004 £000 £000 Net cash outflow from operating activities 19 (21) (206) _____ _____Returns on investments and servicing of finance 20 59 90Capital expenditure and financial investment 20 (18) (214)Acquisitions and disposals 20 (2,457) - _____ _____Cash outflow before management of liquid resources and financing (2,437) (330) Financing 20 578 50 _____ _____Decrease in cash in the year 21 (1,859) (280) ===== ===== NOTES TO THE PRELIMINARY ANNOUNCEMENTYear ended 31 December 2005 The financial information set out in the announcement does not constitute the company's statutory accounts for the years ended 31 December 2005 or 31 December2004. The financial information for the year ended 31 December 2004 is derived fromthe statutory accounts for that year which have been delivered to the Registrarof Companies. The auditors reported on those accounts; their report was unqualifiedand did not contain a statement under s237(2) or (3) Companies Act 1985. The statutoryaccounts for the year ended 31 December 2005 will be delivered to the Registrar ofCompanies following the company's annual general meeting. 1. ACCOUNTING POLICIES A summary of the principal accounting policies, all of which have been applied during the period from incorporation, is set out below. Basis of accounting The financial statements are prepared under the historical cost convention and in accordance with applicable United Kingdom accounting standards. The group financial statements consolidate the financial statements of Volvere plc and its subsidiary undertaking drawn up to 31 December 2005. The results of subsidiaries acquired or sold are consolidated for the periods from or to the date on which control passed. Acquisitions are accounted for under the acquisition method. Goodwill Goodwill, representing the excess of the fair value of consideration given over the fair value of separable net assets acquired, is capitalised as an intangible asset and is amortised over a period of 20 years, being the directors assessment of its likely future life. Provision is made for any impairment. Negative goodwill, representing the excess of the fair value of the separable net assets acquired over the fair value of the consideration given, is capitalised as an intangible asset and credited to the profit and loss account over the periods in which the assets acquired are consumed or realised as cash. Tangible fixed assets The cost of tangible fixed assets is their purchase cost, together with any incidental costs of acquisition. Depreciation is calculated so as to write off the cost of tangible fixed assets, less their estimated residual values, on a straight line basis over the expected useful economic lives of the assets concerned. The principal annual rates used for this purpose are: Improvements to short leasehold property Over the life of the lease Plant and machinery 20% - 33% Investments Investments are carried in the balance sheet at cost less provision for diminution in value. Amounts recoverable on contracts Amounts recoverable on short-term contracts include the cost of direct materials and labour plus attributable overheads. Full provision is made on uncompleted contracts for anticipated losses to completion. Turnover Turnover is recognised on a basis appropriate to the nature of the income source. Turnover 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 of the relevant contract. Associates In the group financial statements investments in associates are accounted for using the equity method. The consolidated profit and loss account includes the group's share of associates' profits less losses while the group's share of the net assets of the associates is shown in the consolidated balance sheet. Goodwill arising on the acquisition of associates is accounted for in accordance with the policy set out above. Any unamortised balance of goodwill is included in the carrying value of the investment in associates. Taxation Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantially 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. These arise from including gains and losses in different periods from those 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 difference can be deducted. Foreign currencies All transactions denominated in foreign currencies are translated into sterling at the actual rate of exchange ruling on the date of the transaction. Assets and liabilities denominated in foreign currencies are translated into sterling at rates of exchange ruling at the balance sheet date at the end of the financial year. All exchange differences arising are taken to the profit and loss account in the year in which they arise. Investment income Income from investments is included in the profit and loss account on an accruals basis, before deduction of any related tax credit. Pension costs The group's subsidiary undertakings, Vectra Group Limited and Sira Test and Certification Limited, operate defined contribution schemes. The contributions to those schemes are charged against profits in the years in which they fall due. The assets of the schemes are held separately from those of the relevant company and group in independently administered funds. The group provides no other post retirement benefits to its employees. Operating leases Costs in respect of operating leases are charged to the profit and loss account on a straight line basis over the lease term. 2. TURNOVER AND LOSS ON ORDINARY ACTIVITIES BEFORE TAX The turnover is attributable to the continuing operations and principal activities of safety and risk consulting, certification services and management services. By Destination 2005 2005 2005 2005 2004 £000 £000 £000 £000 £000 Safety Safety Management and risk Certification and risk services consulting services Total consulting United Kingdom 70 7,867 508 8,445 8,599 Rest of Europe - 1,297 50 1,347 1,187 United States of America - 0 95 95 - Other - 734 5 739 715 ______ ______ ______ ______ ______ 70 9,898 658 10,626 10,501 ====== ====== ====== ====== ====== Segmental Analysis £000 £000 £000 £000 Management Safety and Certification services risk consulting services Group Turnover Total Sales 934 9,898 658 11,490 Inter-segment sales (864) - - (864) ______ ______ ______ ______ Sales to third parties 70 9,898 658 10,626 ====== ====== ====== ====== Segment operating (loss)/profit (202) (48) 67 (183) Realisation of negative goodwill - - - 24 Share of associate's operating profit - - - (89) Share of exceptional items reported after operating profit - - - (30) Realisation of goodwill arising in associate - - - 135 Finance charges 59 Share of associate's finance charges 21 ______ Loss on ordinary activities before taxation (63) ====== Segment net assets 5,157 1,075 9 6,241 ====== ====== ====== Share of associate's net assets 1,535 Unallocated net assets (3,685) Net assets 4,091 ====== For the year ended 31 December 2004 the group's revenues arose solely from safety and risk consulting. For both the year ended 31 December 2005 and 31 December 2004 the net assets were all based in the United Kingdom. Loss on ordinary activities before taxation is stated after charging/(crediting): 2005 2004 £000 £000 Depreciation on owned assets 66 84 Realisation of negative goodwill (see note 9) (159) (60) Amortisation of positive goodwill 16 - Auditors' remuneration: - audit services 35 35 - non-audit services 8 7 Operating lease costs - plant and machinery 162 163 - other 411 438 Exchange (gain)/loss (2) 2 ====== ====== Auditors' remuneration in respect of the company was £10,000 (2004: £14,500). 3. DIRECTORS' EMOLUMENTS The remuneration of the directors was as follows: 2005 2004 £000 £000 Emoluments 153 136 ====== ====== The services of Jonathan Lander, Nick Lander and Richard Kalms are provided under the terms of a Service Agreement dated 19 December 2002 with Dawnay, Day Lander Limited. The amount charged under this agreement (which is included in the amount stated above) for the period amounted to £117,000 (2004: £100,000). None of the directors were members of the group's defined contribution pension plan in the period. 4. STAFF COSTS 2005 2004 £000 £000 Wages and salaries 5,623 5,691 Social security costs 599 666 Pension costs 260 251 ______ ______ 6,482 6,608 ====== ====== The average monthly number of persons employed by the group during the period was 119 (2004: 124) of which management and administration numbered 20 (2004: 30) and consultants and other fee earning staff totalled 99 (2004: 94). The group's subsidiary undertakings, Vectra Group Limited and Sira Test and Certification Limited, operate defined contribution pension plans to which they and their employees contribute. 5. EXCEPTIONAL ITEMS 2005 2004 £000 £000 Costs of a fundamental reorganisation (group share) 30 - ====== ====== The exceptional costs in the year relate to the costs incurred by the Group's associated undertaking, NMT Group PLC, in reorganising its business. Further information on NMT Group PLC is given in Note 12. 6. TAX ON LOSS ON ORDINARY ACTIVITIES 2005 2004 Current tax £000 £000 UK corporation tax - - Share of associate's tax 3 - ______ ______ Total tax on loss on ordinary activities 3 - ====== ====== The standard rate of tax for the year, based on the UK standard rate of corporation tax is 30%. The actual tax charge for the period exceeds the standard rate for the reasons set out in the following reconciliation. 2005 2004 £000 £000 Loss on ordinary activities before tax (63) (211) Less: share of associate's loss before tax 37 - ______ ______ (100) (211) Tax credit on loss on ordinary activities at standard rate 30 63 Factors affecting credit for the period: Expenses disallowable for tax purposes (9) (3) Capital allowances in excess of depreciation 17 17 Tax losses carried forward (45) (83) Movement in short term timing differences 7 6 ______ ______ Total actual amount of current tax - - ====== ====== At 31 December 2005 a deferred tax asset has not been recognised in respect of timing differences relating to capital allowances, revenue losses and other short term timing differences as there is insufficient evidence that the asset will be recovered against future taxable profits. The amount of the asset not recognised is £534,615 (2004: £543,421). 7. PROFIT ATTRIBUTABLE TO THE COMPANY The profit for the financial year dealt with in the financial statements of the parent company was £713,000 (2004: £240,000). As permitted by Section 230 of the Companies Act 1985, no separate profit and loss account is presented in respect of the parent company. 8. LOSS PER SHARE The weighted average number of shares and losses used to calculate earnings per share are given below: 2005 2004 Number Number Number of shares used for basic losses per share 3,667,664 3,628,525 Number of shares deemed to be issued at nil consideration Pursuant to exercise of in-the-money share options 3,383 - Number of shares deemed to be issued at nil consideration under incentive share scheme 267,271 185,820 ______ ______ Number of diluted shares 3,938,318 3,814,345 ====== ====== 2005 2004 £000 £000 Loss attributable to shareholders (60) (211) ====== ====== At the end of the period 3,786,588 ordinary shares (2004: 3,638,440) were in issue. In addition, 100,000 convertible shares (2004: 100,000) were in issue and options for 277,483 shares (2004: 238,624). FRS14 requires presentation of diluted EPS when a company could be called upon to issue shares that would decrease net profit or increase net loss per share. The loss per share would decrease if shares were issued upon exercise of the share options or under the incentive share scheme and therefore diluted loss per share is the same as basic loss per share. 9. INTANGIBLE FIXED ASSETS - GOODWILL Positive Negative Goodwill Goodwill £000 £000 Cost At 1 January 2005 - (1,402) Additions (see notes 12 and 13) 1,301 (135) ______ ______ At 31 December 2005 1,301 (1,537) ______ ______ Amortisation At 1 January 2005 - 1,312 (Charged)/realised in the period (16) 159 ______ ______ At 31 December 2005 (16) 1,471 ______ ______ Net book value At 31 December 2005 1,285 (66) ====== ====== At 31 December 2004 - (90) ====== ====== The balance of negative goodwill is being realised over the periods in which the assets to which it relates are consumed by the Group. This period is expected to extend out three years from the anniversary of the underlying acquisition. 10. TANGIBLE FIXED ASSETS Group Short Leasehold Plant and property machinery Total £000 £000 £000 Cost At 1 January 2005 419 985 1,404 Acquisition of business 10 27 37 Additions 20 77 97 Disposals - (5) (5) ______ ______ ______ At 31 December 2005 449 1,085 1,533 ______ ______ ______ Depreciation At 1 January 2005 318 933 1,251 Charge for the period 33 33 66 Disposals - (2) (2) ______ ______ ______ At 31 December 2005 351 964 1,315 ______ ______ ______ Net book value At 31 December 2005 98 120 218 ====== ====== ====== At 31 December 2004 101 52 153 ====== ====== ====== 11. FIXED ASSET INVESTMENTS 2005 2004 Group Company Group Company £000 £000 £000 £000 Subsidiary undertakings - 2,124 - 2,124 Other investments - - 192 192 Investment in associated undertaking 1,535 1,495 - - ______ ______ ______ ______ 1,535 3,619 192 2,316 ====== ====== ====== ====== The Company's investments represent 100% of the ordinary share capital of Vectra Group Limited and 26.05% of the ordinary share capital of NMT Group PLC. Other investments at 31 December 2004 represented the Company's investment in NMT Group PLC which, following the increase in the Company's holding during the year ended 31 December 2005, has been reclassified as an associated undertaking. The investments in subsidiary and associated undertakings are stated at cost. The Company acquired its stake in NMT Group PLC for cash but, on 23 September 2005, entered into a Contract for Difference ("CFD") in respect of 1,306,600 shares (out of a total holding of 2,269,024 shares). This resulted in the legal ownership in these shares transferring to the CFD provider, with the Company retaining the economic interest. On this basis the economic benefit of these shares has been reflected in the associate interest accounted for by the group. The funds received from the CFD provider upon the transfer of the holding to it, net of the funds provided by the Company as security under the terms of the CFD, have been treated as an increase in debt. At 30 December 2005 the market value of the investment in NMT Group PLC (including the shares held under the CFD) amounted to £1,270,653. Subsidiary undertakings (see note 24) Group Company £000 £000 Cost and Net Book Value At 1 January 2005 and 31 December 2005 - 2,124 ====== ====== Other investments Group Company £000 £000 Cost and Net Book Value 1 January 2005 192 192 Reclassification as associated undertaking (192) (192) ______ ______ 31 December 2005 - - ====== ====== Associated undertaking Group Company £000 £000 Cost and Net Book Value 1 January 2005 - - Reclassification as associated undertaking 192 192 Additions (Note 12 below) 1,368 1,368 Disposals (65) (65) Realisation of negative goodwill 135 - Share of loss of associated undertaking (95) - ______ ______ 31 December 2005 1,535 1,495 ====== ====== 12. ACQUISITION OF ASSOCIATED UNDERTAKING As noted in Note 11 above, during the year the Company increased its investment in NMT Group PLC and reclassified it from other investments to become an associated undertaking when the Company appointed three directors to NMT Group PLC's board on 14 September 2005. The following table sets out the Company's share of the book values of the identifiable assets and liabilities acquired at the point that NMT Group PLC became an associated undertaking and their fair value to the Group: Book Provisional Fair value at fair value value at acquisition adjustments acquisition £000 £000 £000 Fixed assets Tangible 244 (244) - Current assets Other debtors 174 - 174 Cash 6,292 - 6,292 ______ ______ ______ Total assets 6,710 (244) 6,466 ______ ______ ______ Creditors Trade and other creditors (207) - (207) ______ ______ ______ Total liabilities (207) - (207) ______ ______ ______ Net assets 6,503 (244) 6,259 ______ ______ ______ Group share of net assets acquired 1,630 Negative goodwill recognised (135) ______ Purchase consideration 1,495 ====== Satisfied by Cash 1,495 ====== Details of the fair value adjustments are as follows: Tangible fixed assets The directors performed a review for impairment of tangible fixed assets. This review resulted in an impairment charge against tooling and plant and machinery of £244,000. The financial information below, in relation to 2005, has been extracted from the unaudited management accounts for the period from 1 January to 14 September 2005, when NMT Group PLC became an associated undertaking and the audited financial statements for the year ended 31 December 2004: Unaudited Audited 1 January 12 months to -14 September 2005 31 December 2004 £000 £000 Turnover - - Cost of sales - - ______ ______ Gross profit - - Distribution costs (31) (252) Administration expenses (310) (1,325) Exceptional administration expenses - (696) ______ ______ Operating loss (341) (2,273) Exceptional item Note (a) (116) 73 ______ ______ Loss before interest and tax (457) (2,200) Interest income 81 391 ______ ______ Loss on ordinary activities before tax (376) (1,809) Taxation on loss on ordinary activities 11 71 ______ ______ Loss for the period (365) (1,738) ====== ====== Note (a): The exceptional item in 2005 has been reduced by the extent of the Group's fair value adjustment of £244,000, which was accounted for by the associate as an exceptional item in the period following the acquisition. The following disclosures are given in accordance with FRS9 based upon unaudited information from NMT Group PLC, adjusted where appropriate for period for which the company was an associated undertaking: Unaudited 14 September - 31 December Group share of associated undertaking: 2005 £000 Turnover - ========= Loss before tax (98) Taxation 3 _________ Loss after tax (95) ========= Unaudited 31 December 2005 £000 Fixed assets - Current assets 1,606 Liabilities falling due within one year (48) Liabilities falling due after one year or more - ========= 13. ACQUISITION OF BUSINESS AND ASSETS On 29 September 2005 the Group acquired certain business and assets from the Sira group of companies for a consideration of £1,463,000 payable at completion following the determination of the net assets at that time. Of the consideration, £1,163,000 was payable in cash and the balance satisfied by the issue of Volvere plc ordinary shares. For the purpose of undertaking this transaction, the company established a new wholly-owned subsidiary, Sira Test and Certification Limited, which since the acquisition has commenced trading. As part of the acquisition, the group became a controlling member in Sira Certification Service, a company limited by guarantee. Sira Certification Service does not trade other than to hold certain accreditations relating to the business of Sira Test and Certification Limited and activities outside of the group. Subsequent to completion the group reassigned to the seller certain trade debtors with a combined value of £134,000 in exchange for cash. This has been treated as an adjustment to the fair value of the assets acquired and the total consideration paid. The fair value of the total consideration was £1,390,000 (including £61,000 of associated expenses). The following table sets out the book values of the identifiable assets and liabilities acquired and their fair value to the group: Book Provisional Fair value value at fair value to group at acquisition adjustments acquisition £000 £000 £000 Fixed assets Tangible 37 - 37 Current assets Debtors (incl. amounts recoverable under contracts) 612 (105) 507 Cash 1 - 1 ______ ______ ______ Total assets 650 (105) 545 ______ ______ ______ Creditors Trade creditors (65) - (65) Accruals and deferred income (399) 8 (391) ______ ______ ______ Total liabilities (464) 8 (456) ______ ______ ______ Net assets acquired 186 (97) 89 ______ ______ Goodwill capitalised 1,301 ______ Purchase consideration, including certain costs, after debtors transfer to seller 1,390 ====== Satisfied by Cash 1,090 Ordinary shares 300 ______ 1,390 ====== Details of the fair value adjustments are as follows: Tangible fixed assets The directors performed a review for impairment of tangible fixed assets. This review did not result in a change to the book value of the assets acquired. Debtors The directors performed a review of the recoverability of debtors (including amounts recoverable under contracts) and this has resulted in an increase in the carrying values. As noted above, aggregate debtor balances totalling £134,000 were assigned back to the seller following completion for an amount equal to their face value. Trade creditors and accruals The directors performed a review of the valuation of creditors and accruals which has resulted in certain creditors and accruals being restated. The business and assets acquired were previously part of the trading operations undertaken by the seller's group and accordingly statutory accounts were not prepared for the business acquired. However, the financial information below has been extracted from unaudited management accounts for the periods stated. 21 weeks 52 weeks to 26 August to 31 March 2005 2005 £000 £000 Turnover 899 2,342 ====== ====== Operating profit - before management charges 178 314 ====== ====== Net profit before taxation 178 314 ====== ======14. DEBTORS 2005 2004 Group Company Group Company £000 £000 £000 £000 Trade debtors 2,112 28 1,643 - Amounts recoverable on contracts 1,253 - 876 - Amounts due from subsidiary undertaking - 1,960 - 69 Other debtors 67 - 13 - Prepayments and accrued income 231 9 258 9 ______ ______ ______ ______ 3,663 1,997 2,790 78 ====== ====== ====== ====== 15. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 2005 2004 Group Company Group Company £000 £000 £000 £000 Other loans 578 578 - - Trade creditors 919 94 735 128 Other taxes and social security 193 - 174 - VAT payable 363 73 388 32 Other creditors 285 - 263 - Accruals and deferred income 1,350 103 648 65 ______ ______ ______ ______ 3,688 848 2,208 225 ====== ====== ====== ====== The other loans balance is the net amount due under a contract for difference (see note 11). Interest payable is at a rate of 1% over LIBOR and the loan has a repayment period that is subject to periodic review. The company's subsidiary Vectra Group Limited has issued a debenture creating fixed and floating charges over substantially all Vectra's assets to secure amounts owing to its bankers. As at 31 December 2005 no amounts subject to this security had been drawn down. 16. CALLED UP SHARE CAPITAL Company 2005 2004 £000 £000 Authorised 100,100,000 Ordinary shares of £0.0000001 each - - 50,000 A shares of £0.49999995 each 25 25 50,000 B shares of £0.49999995 each 25 25 4,999,999,500,000 Deferred shares of £0.00000001 each 50 50 ====== ====== Issued, called-up and fully paid 3,786,588 ordinary shares (2004: 3,638,440) of £0.0000001 each - - 49,735 A shares of £0.49999995 each 25 25 49,735 B shares of £0.49999995 each 25 25 2,649,998,554 Deferred shares of £0.00000001 each - - ====== ====== On 21 October 2005 148,148 £0.0000001 ordinary shares were issued at £2.025 each, giving rise to share premium on issue of £300,000. The A and B class shares rank pari passu with the ordinary shares on a return of capital and have equal voting rights. The A and B shares became capable of being converted into ordinary shares at the option of the holder on or after 24 December 2003 and 24 December 2004 respectively, on a predetermined conversion formula based upon share price performance, whereby 15% of the growth in market capitalisation of Group is attributable to the holders of the A and B shares. Based on the closing share price of £1.975 at 31 December 2005, the A and B class shares would be capable of converting into 267,271 ordinary shares (2004: 185,820). The deferred shares carry no rights to participate in the profits or assets of the Company and carry no voting rights. Option scheme Date of grant Exercise price (pence) Number Volvere plc EMI Plan 30 June 2005 190.0 132,569 30 June 2004 187.5 78,594 Unapproved 13 April 2004 187.5 31,000 24 December 2002 100.0 36,097 _______ 278,260 ======= Options granted under the Volvere plc EMI Plan vest subject to certain performance and time-based criteria and are exercisable between 3 and 10 years following grant. Options granted on 31 December 2004 over 92,050 shares at 190.0p were cancelled during 2005. The Unapproved options granted on 13 April 2004 vest as to 10,334 on each of 8 December 2004 and 8 December 2005 and 10,332 on 8 December 2006. Those granted on 24 December 2002 can be exercised at any time until 24 December 2007. 17. SHARE PREMIUM AND RESERVES Group Profit Share and loss premium account Total £000 £000 £000 At beginning of year 50 3,740 3,790 Loss transferred for the year - (60) (60) Premium on share issues (including refund of expenses) 311 - 311 ______ ______ ______ At end of year 361 3,680 4,041 ====== ====== ====== Company Profit Share and loss premium account Total £000 £000 £000 At beginning of year 50 4,033 4,083 Profit transferred for the year - 713 713 Premium on share issues (including refund of expenses) 311 - 311 ______ ______ ______ At end of year 361 4,746 5,107 ====== ====== ====== 18. RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS 2005 2004 Group Company Group Company £000 £000 £000 £000 Opening shareholders' funds 3,840 4,133 4,001 3,843 Issue of share capital 300 300 50 50 Refund of expenses associated with issue of share capital 11 11 - - (Loss)/profit for the year (60) 713 (211) 240 ______ ______ ______ ______ Closing shareholders' funds 4,091 5,157 3,840 4,133 ====== ====== ====== ====== The refund of expenses associated with the issue of share capital was as a result of VAT being refunded that had been written off previously to the share premium account. 19. RECONCILIATION OF OPERATING LOSS TO OPERATING CASH FLOWS Group 2005 2004 £000 £000 Operating loss (159) (301) Depreciation and goodwill amortisation 82 84 Realisation of negative goodwill (24) (60) Profit on sale of investments (11) - Decrease in stocks - 5 (Increase)/decrease in debtors (366) 147 Increase/(decrease) in creditors 457 (81) ______ ______ Net cash outflow from operating activities (21) (206) ====== ====== 20. ANALYSIS OF CASH FLOWS Group 2005 2004 £000 £000 Returns on investments and servicing of finance Interest received 59 90 ______ ______ Net cash inflow from returns on investments and servicing of finance 59 90 ====== ====== Capital expenditure and financial investment Purchase of tangible fixed assets (97) (25) Sale of tangible fixed assets 3 3 Purchase of equity investment - (192) Sale of equity investment 76 - ______ ______ Net cash outflow from capital expenditure and financial investment (18) (214) ====== ====== Acquisitions and disposals Acquisition of business and assets (1,090) - Net cash acquired on acquisition of business 1 - Investment in associated undertaking (1,419) - ______ ______ Net cash outflow from acquisition and disposals (2,508) - ====== ====== Financing Issue of share capital - 50 Increase in short term borrowings 874 - Repayment of short term borrowings (296) - ______ ______ Net cash inflow from financing 578 50 ====== ====== 21. ANALYSIS AND RECONCILIATION OF NET FUNDS Group 1 January Cash 31 December 2005 flow 2005 £000 £000 £000 Cash in hand at bank, being net funds 3,003 (1,859) 1,144 Other loans - within one year - (578) (578) ______ ______ ______ 3,003 (2,437) 566 ====== ====== ====== 2005 2004 £000 £000 Decrease in cash in the year (1,859) (280) Cashflow from movement in debt and lease financing (578) - ______ ______ Change in net funds resulting from cashflows (2,437) (280) Net funds at start of year 3,003 3,283 ______ ______ Net funds at end of year 566 3,003 ====== ====== ====== 22. COMMITMENTS AND CONTINGENCIES Operating leases The group has the following annual commitments under non-cancellable operating leases: 2005 2004 Plant and Plant and machinery Other machinery Other £000 £000 £000 £000 Expiry date - within one year 40 344 17 175 - between two and five years 80 49 88 232 ______ ______ ______ ______ 120 393 105 407 ====== ====== ====== ====== 23. RELATED PARTIES The company has taken advantage of the exemption available to it under FRS8 paragraph 3(b) relating to transactions and balances with subsidiaries. As stated in note 3 above, the company's Executive Directors are provided under the terms of a Service Agreement dated 19 December 2002 with Dawnay, Day Lander Limited. The amount payable under this agreement in the period amounted to £117,000. In addition, pursuant to a Facilities Agreement dated 19 December 2002 with Dawnay, Day Lander Limited, the company is provided with certain administrative and support services. The amount payable under this agreement during the period amounted to £35,000. The amount invoiced to NMT Group PLC for management services was £70,000. 24. SUBSIDIARY UNDERTAKINGS The subsidiary undertakings at 31 December 2005 are shown below. All subsidiary undertakings are registered in the United Kingdom and prepare accounts to 31 December each year. Principal Activity Holding Vectra Group Limited Provision of safety, risk and other 100% consulting and field services Vectra Partners Limited Dormant 100% Vectra (Middle East) Limited Provision of safety, risk and other consulting and field services 100% Sira Test and Certification Limited Certification services 100% Sira Certification Service* Certification services 67% The investments in Vectra Partners Limited and Vectra Technologies Limited are held by Vectra Group Limited. The proportion of voting rights held is equivalent to the equity shareholdings. * Sira Certification Service is a company limited by guarantee. The Group controls two-thirds of the member shares. 25. POST BALANCE SHEET EVENT On 29 March 2006 the Group acquired the business and assets of Sira Environmental Certification Limited ('Sira Environmental'), as well as some of the business and assets of Sira Technology Limited (the 'Meerkat' business). The consideration payable for the business and assets of Sira Environmental and Meerkat was £30,000 in cash. The fair value of the net assets acquired is estimated £80,000. As part of this transaction, the Group acquired the remaining one third share in Sira Certification Service. This information is provided by RNS The company news service from the London Stock Exchange