Volvere Regulatory News (VLE)

22 Mar 2005 07:01

Volvere PLC22 March 2005 22 March 2005 VOLVERE PLC FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004 Volvere plc ("Volvere" or "the Company"), the turnaround investment company,announces its final results for the year ended 31 December 2004. The priorperiod to 31 December 2003 reflected the results of the Company sinceincorporation and approximately 7 months of trading from Vectra Group Limited ("Vectra"), acquired during 2003. Highlights • Turnover £10.5m (period to 31 December 2003: £7.06m), all arising from the Group's subsidiary, Vectra Group Limited ('Vectra') • Pre-tax and post-tax loss £0.21m (period to 31 December 2003 profit: £0.55m), stated after crediting negative goodwill of £0.06m (period to 31 December 2003: £1.25m) and charging restructuring costs of £0.1m relating to Vectra (period to 31 December 2003: £0.1m) • Vectra profitable before Group management charges since first quarter of year following successful turnaround and new business wins; average monthly operating loss before Group management charges reduced to £4k (7 months to 31 December 2003: £63k) • Net assets of £3.84m (31 December 2003: £4.0m; 2 July 2004: £3.83m) • Cash on hand £3.00m (31 December 2003: £3.28m; 2 July 2004: £3.01m) • Basic loss per share 5.82p (31 December 2003 profit: 16.53p; 2 July 2004 loss: 6.02p). • No dividend proposed Lord Kalms, Chairman of Volvere plc, said: "I am pleased to report a continued improvement in Volvere's underlyingfinancial performance arising from the increasingly positive trading at theGroup's sole subsidiary, Vectra. Vectra has been profitable (before Groupmanagement charges) since the end of the first quarter last year and we haveseen a reassuring start to 2005. We have several interesting potentialacquisitions and investment opportunities under review." For further information, please contact: Jonathan Lander, Chief Executive OfficerNick Lander, Chief Operating & Financial 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 CHAIRMAN'S STATEMENT I am pleased to report on the results for the year ended 31 December 2004. Last year I reported how we believed that the changes we made to Vectra'soperations put it on a platform for growth and profitability. Vectra'sperformance continues to improve and its turnaround is substantially complete.We reported in our interim results that Vectra was profitable before groupmanagement charges in the second quarter. I am pleased to report thatprofitability continued in the third and fourth quarters. As part of our commitment to see Vectra's performance increase further we havestrengthened the management team with the recruitment of a highly experiencedManaging Director. This has the further benefit of freeing Group managementfrom Vectra's day-to-day operations and permits increased focus on originatingfollow-on corporate transactions. OUTLOOK The trading at Vectra has continued to be reassuring in the early part of 2005and we remain confident for the rest of the year. The Group has significantcash reserves, a strong balance sheet and a profitable subsidiary. I lookforward to new opportunities as they arise in the year ahead. Lord KalmsChairman22 March 2005 CHIEF EXECUTIVE STATEMENT I have reported before on how the strength of equity markets and low levels ofinterest rates have made it more difficult for us to find companies tradingbelow the realisable value of their net assets or alternatively that were indistress. During the period we nevertheless identified one company that we feltwas undervalued, namely NMT Group PLC. At the year end we held approximately3.7% of that company's share capital, which we acquired at an attractive price.We reviewed a number of distressed companies during the period although nonehave met our requirements for investment or acquisition. The number of proposalsthat we have considered has however increased. We have set a high standard withour acquisition of Vectra in 2003 and remain committed to further acquisitions.I remain confident of the growth potential of Vectra. OPERATING REVIEW - VECTRA Vectra's turnover for the year ended 31 December 2004 was £10,501,000 (24 May2003 to 31 December 2003 £7,061,000) and its operating loss before Groupmanagement charges was £43,000 (see Table A) (24 May 2003 to 31 December 2003:£444,000). This result is good, particularly since it is stated afterrestructuring costs of £98,000 (24 May 2003 to 31 December 2003 £114,000). Vectra's operating loss before Group management charges has continued to reduce,with a monthly average for 2004 of less than £4,000. This compares veryfavourably with a 2003 pre-acquisition loss of approximately £201,000 per monthand 2003 post-acquisition average loss of approximately £63,000 per month. Further information about Vectra's performance is contained in the FinancialReview below. Following its establishment in late 2003, our Middle East office has deliverednew leads and new business with local clients. There and elsewhere we have wonnew assignments and extensions to existing client projects including contractswith Shell Group, JGC Corporation, BNFL, Dolphin Energy, Fluor, ProRail (TheNetherlands), Tube Lines, Metronet, Network Rail, QinetiQ, the London Boroughsof Brent and Hillingdon and the Health and Safety Executive. Our main marketsectors remain: Nuclear, Oil and Gas, Transport and Property. EMPLOYEES We have recruited a new Managing Director for Vectra who joined in January 2005.I am confident that this will allow us to build on the considerable work thatthe management and employees of Vectra have put in over the last two years. Thelevel of professionalism as well as motivation and dedication of our staffcontinues to be our strength. These are the reasons for the turnaround and forwhich I thank them. ACQUISITIONS AND FUTURE STRATEGY The successful turnaround of Vectra shows that we can source, acquire and turnround companies within an acceptable timescale and on attractive terms. Weremain committed to building our existing subsidiary into a very profitableunit. At the same time we are looking to acquire other companies that offerattractive returns at an acceptable level of risk. Jonathan LanderChief Executive22 March 2005 FINANCIAL REVIEW This Financial Review covers the Group's performance during the year ended 31December 2004. It should be read in conjunction with the Chairman's and ChiefExecutive's statements. TURNOVER AND OPERATING PERFORMANCE As noted in the Chief Executive's report, Vectra's operating performancecontinued to improve during the year. Table A below summarises key financialinformation in relation to Vectra. Turnover in the period was £10,501,000, all of which was generated by Vectra. Vectra's average monthly turnover fell by 13% during the year when compared withthe seven month post-acquisition period from 24 May 2003 to 31 December 2003. This was due principally to lower volumes in the Contract Recruitment andDisaster Recovery businesses, following our decision to reduce our activities inthe former and exit the latter. Both businesses were not capable of achievingsuitable levels of profitability for the risks associated with them. The Group's loss before tax for the year was £211,000 (2003: profit £546,000),after realising £60,000 of negative goodwill (2003: £1,252,000). The reductioncompared to the prior period was a result of the underlying assets acquired,which gave rise to the negative goodwill, having been turned substantially intocash or consumed in the business. Although the Group reported a loss before tax for the year as a whole, this wasless than that reported at the interim results for the first half of the year (2July 2004: £218,000), the improved second half performance at Vectra resultingin a small profit before tax being achieved overall in the second half. Thiswas achieved in spite of turnover being 7% lower in the second half of the year(2nd Half £5,054,000, 1st Half £5,447,000), due principally to reduced billablehours over the summer and Christmas vacation periods. The gross margin was 45% for the year (2003: 42%), all of which was attributableto Vectra. During the year, we saw margins increase between the first half(44%) and second half (46%). Table A Year ended 31 24 May December 2003 to 31 2004 December 2003 £000 £000 Turnover 10,501 7,061 Average monthly turnover 875 1,009 Operating loss (notes 1 and 2) (43) (444) Average monthly operating loss (notes 1 and 2) (4) (63) Note 1: The operating loss for the year is before group management charges of£480,000 (24 May to 31 December 2003: £616,000). Note 2: The operating loss for the year is after restructuring costs of £98,000(24 May to 31 December 2003: £114,000). TAXATION The Group had no tax charge in the year. LOSS PER SHARE The basic and diluted loss per share was 5.82p (2003 basic and diluted earningsper share: 16.53p and 15.44p respectively). During the year the Groupimplemented a share option scheme in which all staff are entitled toparticipate, subject to certain conditions. NEGATIVE GOODWILL Negative goodwill arising on the acquisition of Vectra has been capitalised asan intangible asset and credited to the profit and loss account during theperiod in so far as the assets acquired have been consumed or realised as cash. In the period an amount of £nil (2003: £1,402,000) was capitalised and £60,000(2003: £1,252,000) credited to the profit and loss account. CASH MANAGEMENT The Group had no borrowings during the year. Cash balances totalled £3,003,000(2003: £3,238,000). Although cash was lower than the prior period, thereduction was after investments made in 2004 totalling £192,000. 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 butprefers to retain profits as they arise for investment in future opportunities. Nick LanderChief Operating & Financial Officer22 March 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNTYear ended 31 December 2004 Period from 5 Year July 2002 ended 31 to 31 December December 2004 2003* Note £000 £000 £000 £000 TURNOVER 2 10,501 7,061Cost of sales (5,787) (4,090) Gross profit 4,714 2,971Administrative expenses- before realisation of negative goodwill (5,075) (3,768)- realisation of negative goodwill 60 1,252 (5,015) (2,516) OPERATING (LOSS)/PROFIT (301) 455 Finance income - interest receivable 90 91 (LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE TAX 2 (211) 546Tax on profit on ordinary activities 5 - - (LOSS)/PROFIT ON ORDINARY ACTIVITIES AFTERTAX, BEING RETAINED (LOSS)/PROFIT FOR THEPERIOD 15 (211) 546 (LOSS)/EARNINGS PER ORDINARY SHARE OF0.00001p:- Basic 7 (5.82p) 16.53p- Diluted 7 (5.82p) 15.44p All results are derived from continuing operations. There have been no recognised gains and losses attributable to the shareholdersother than the losses for the current and preceding financial period andaccordingly, no statement of total recognised gains and losses is shown. * The consolidated profit and loss for the period from 5 July 2002 to 31December 2003 includes the results of Vectra Group Limited for the period fromacquisition on 24 May 2003 to 31 December 2003. BALANCE SHEETS31 December 2004 2004 2003 Group Company Group Company Note £000 £000 £000 £000 FIXED ASSETSIntangible fixed assets - negative goodwill 8 (90) - (150) -Tangible fixed assets 9 153 - 215 -Investments 10 192 2,316 - 2,124 255 2,316 65 2,124CURRENT ASSETSStocks 11 - 5 -Debtors 12 2,790 78 2,937 645Cash at bank and in hand 3,003 1,964 3,283 1,258 5,793 2,042 6,225 1,903 CREDITORS: amounts falling due within oneyear 13 (2,208) (225) (2,289) (184) NET CURRENT ASSETS 3,585 1,817 3,936 1,719 TOTAL ASSETS LESS CURRENT LIABILITIES 3,840 4,133 4,001 3,843 CAPITAL AND RESERVESCalled up share capital 14 50 50 50 50Share premium account 15 50 50 - -Profit and loss account 15 3,740 4,033 3,951 3,793 EQUITY SHAREHOLDERS' FUNDS 16 3,840 4,133 4,001 3,843 CONSOLIDATED CASH FLOW STATEMENTYear ended 31 December 2004 Period from 5 July 2002 to Year ended 31 31 December December 2004 2003* Note £000 £000 Net cash (outflow)/inflow from operating activities 17 (206) 1,356 Returns on investments and servicing of finance 18 90 91Capital expenditure and financial investment 18 (214) (59)Acquisitions and disposals 18 - (1,560) Cash outflow before management of liquid resources andfinancing (330) (172) Financing 18 50 3,455 (Decrease)/increase in cash in the year (280) 3,283 * The consolidated cash flow statement for the period from 5 July 2002 to 31December 2003 includes the results of Vectra Group Limited for the period fromacquisition on 24 May 2003 to 31 December 2003. NOTES TO THE PRELIMINARY ANNOUCEMENTYear ended 31 December 2004 The financial information set out in the announcement does not constitute thecompany's statutory accounts for the year ended 31 December 2004 or the periodended 31 December 2003. The financial information for the year ended 31 December2003 is derived from the statutory accounts for that year which have beendelivered to the Registrar of Companies. The auditors reported on thoseaccounts; their report was unqualified and did not contain a statement unders237(2) or (3) Companies Act 1985. The statutory accounts for the year ended 31December 2004 will be delivered to the Registrar of Companies following thecompany's annual general meeting. ACCOUNTING POLICIES A summary of the principal accounting policies, all of which have been appliedduring the period from incorporation, is set out below. Basis of accounting The financial statements and preliminary announcement are prepared under thehistorical cost convention and in accordance with applicable United Kingdomaccounting standards and on the basis of the accounting policies set out in theaudited accounts to 31 December 2003. The group financial statements consolidate the financial statements of Volvereplc and its subsidiary undertaking drawn up to 31 December 2004. The results ofsubsidiaries acquired or sold are consolidated for the periods from or to thedate on which control passed. Acquisitions are accounted for under theacquisition method. Goodwill Goodwill, representing the excess of the fair value of consideration given overthe fair value of separable net assets acquired, is capitalised as an intangibleasset and is amortised over a period of 20 years, being the directors assessmentof its likely future life. Provision is made for any impairment. Negative goodwill, representing the excess of the fair value of the separablenet assets acquired over the fair value of the consideration given, iscapitalised as an intangible asset and credited to the profit and loss accountover 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 anyincidental costs of acquisition. Depreciation is calculated so as to write offthe cost of tangible fixed assets, less their estimated residual values, on astraight line basis over the expected useful economic lives of the assetsconcerned. The principal annual rates used for this purpose are: Improvements to short leasehold property Over the life of the leasePlant and machinery 20% - 33% Investments Investments are carried in the balance sheet at cost less provision fordiminution in value. Stocks and work in progress Stock is valued at the lower of cost and net realisable value. Provision ismade for obsolete, slow moving and defective stocks. Net realisable value isbased on estimated selling price less the estimated cost of disposal. Amounts recoverable on contracts Amounts recoverable on short-term contracts include the cost of direct materialsand labour plus attributable overheads. Full provision is made on uncompletedcontracts for anticipated losses to completion. Turnover Turnover is recognised on a basis appropriate to the nature of the incomesource. Turnover earned on time and materials contracts is recognised as costsare incurred. Income from fixed price contracts is recognised in proportion tothe stage of completion of the relevant contract. NOTES TO THE PRELIMINARY ANNOUCEMENT (CONTINUED)Year ended 31 December 2004 1. ACCOUNTING POLICIES (CONTINUED) Taxation Current tax, including UK corporation tax and foreign tax, is provided atamounts expected to be paid (or recovered) using the tax rates and laws thathave been enacted or substantially enacted by the balance sheet date. Deferred tax is recognised in respect of all timing differences that haveoriginated but not reversed at the balance sheet date where transactions orevents that result in an obligation to pay more tax in the future, or a right topay less tax in the future, have occurred at the balance sheet date. Timingdifferences are differences between the group's taxable profits and its resultsas stated in the financial statements. These arise from including gains andlosses in different periods from those recognised in the financial statements. A net deferred tax asset is regarded as recoverable and therefore recognisedonly when, on the basis of all available evidence, it can be regarded as morelikely than not that there will be suitable taxable profits from which thefuture reversal of the underlying timing difference can be deducted. Deferred tax is measured at the average tax rates that are expected to apply inthe periods in which the timing differences are expected to reverse based on taxrates and laws that have been enacted or substantially enacted by the balancesheet date. Deferred tax is measured on a non-discounted basis. Foreign currencies All transactions denominated in foreign currencies are translated into sterlingat the actual rate of exchange ruling on the date of the transaction. Assetsand liabilities denominated in foreign currencies are translated into sterlingat rates of exchange ruling at the balance sheet date at the end of thefinancial year. All exchange differences arising are taken to the profit andloss account in the year in which they arise. Investment income Income from investments is included in the profit and loss account on anaccruals basis, before deduction of any related tax credit. Pension costs The group's subsidiary undertaking, Vectra, operates a defined contributionscheme. Vectra's contributions are charged against profits in the years inwhich they fall due. The assets of the scheme are held separately from those ofthe 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 accounton a straight line basis over the lease term. 2. TURNOVER AND (LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE TAX The turnover is attributable to the continuing operations and principal activityof safety, risk and other consulting and field services. By Destination and Origin 2004 2003 £000 £000 United Kingdom 8,599 6,197Rest of Europe 1,187 555United States of America - 23Other 715 286 10,501 7,061 Loss)/Profit on ordinary activities before taxation is stated after charging/(crediting): 2004 2003 £000 £000 Profit on sale of fixed assets - 1Depreciation on owned assets 84 80Realisation of negative goodwill (see note 8) (60) (1,252)Auditors' remuneration:- audit services 35 48- non-audit services 7 24Operating lease costs- plant and machinery 163 131- other 438 218Exchange loss/(gain) 2 (19) Auditors' remuneration in respect of the company was £14,500 (2003: £24,000). 3. DIRECTORS' EMOLUMENTS The remuneration of the directors was as follows: 2004 2003 £000 £000 Emoluments 136 91 The services of Jonathan Lander, Nick Lander and Richard Kalms are providedunder the terms of a Service Agreement dated 19 December 2002 with Dawnay, DayLander Limited. The amount charged under this agreement (which is included inthe amount stated above) for the period amounted to £100,000. None of the directors were members of the group's defined contribution pensionplan in the year. 4. STAFF COSTS 2004 2003 £000 £000 Wages and salaries 5,691 4,111Social security costs 666 429Pension costs 251 148 6,608 4,688 The average monthly number of persons employed by the group during the periodwas 124 of which management and administration numbered 30 and consultants andother chargeable staff totalled 94 (2003: 184 being management andadministration 38, consultants and other chargeable staff 146). The group's subsidiary undertaking, Vectra, operates a defined contributionpension plan to which it and its employees contribute. 5. TAX ON (LOSS)/PROFIT ON ORDINARY ACTIVITIES 2004 2003 £000 £000 UK corporation tax - - The standard rate of tax for the year, based on the UK standard rate ofcorporation tax is 30% (2003: 30%). The actual tax charge for the year exceedsthe standard rate for the reasons set out in the following reconciliation. 2004 2003 £000 £000 (Loss)/profit on ordinary activities before tax (211) 546Tax charge on loss on ordinary activities at standardrate 63 (164)Factors affecting charge for the period:Income not chargeable for tax purposes (3) 336Capital allowances in excess of depreciation 17 (3)Tax losses not recognised (83) (167)Movement in short term timing differences 6 (2) Total actual amount of current tax - - At 31 December 2004 a deferred tax asset has not been recognised in respect oftiming differences relating to capital allowances, revenue losses and othershort term timing differences as there is insufficient evidence that the assetwill be recovered against future taxable profits. The amount of the asset notrecognised is £543,421 (2003: £396,000). 6. PROFIT ATTRIBUTABLE TO THE COMPANY The profit for the financial year dealt with in the financial statements of theparent company was £240,000 (2003: £388,000). As permitted by Section 230 ofthe Companies Act 1985, no separate profit and loss account is presented inrespect of the parent company. 7. EARNINGS PER SHARE The weighted average number of shares and earnings used to calculate earningsper share are given below: 2004 2003 Number Number Number of shares used for basic earnings per share 3,628,525 3,303,602Number of shares deemed to be issued at nil considerationunder incentive share scheme (see note 14) 185,820 232,053 Number of shares used for diluted earnings per share 3,814,345 3,535,655 2004 2003 £000 £000 (Loss)/earnings attributable to shareholders (211) 546 At the end of the period 3,638,440 ordinary shares (2003: 3,609,720) were inissue. In addition, 99,470 convertible shares (2003: 100,000) were in issue andoptions for 237,741 shares (2003: 145,691). FRS14 requires presentation ofdiluted EPS when a company could be called upon to issue shares that woulddecrease net profit or increase net loss per share. For a loss making companywith outstanding share options net loss per share would only be increased by theexercise of out-of-the-money share options. Accordingly, no adjustment has beenmade to diluted EPS for out-of-the-money share options. 8. INTANGIBLE FIXED ASSETS - NEGATIVE GOODWILL Negative Goodwill £000 CostAt 1 January 2004 (1,402)At 31 December 2004 (1,402) AmortisationAt 1 January 2004 1,252Realised in the year 60At 31 December 2004 1,312 Net book valueAt 31 December 2004 (90)At 31 December 2003 (150) The balance of negative goodwill is being realised over the periods in which theassets to which it relates are consumed by the Group. This period is expectedto extend out four years. 9. TANGIBLE FIXED ASSETS Group Short leasehold Plant and property machinery Total £000 £000 £000CostAt 1 January 2004 414 994 1,408Additions 5 20 25Disposals - (29) (29) At 31 December 2004 419 985 1,404 DepreciationAt 1 January 2004 294 899 1,193Charge for the year 24 60 84Disposals - (26) (26) At 31 December 2004 318 933 1,251 Net book valueAt 31 December 2004 101 52 153 At 31 December 2003 120 95 215 10. FIXED ASSET INVESTMENTS 2004 2003 Group Company Group Company £000 £000 £000 £000 Subsidiary undertaking - 2,124 - 2,124Other investments 192 192 - - 192 2,316 - 2,124 The Company's investments represent 100% of the ordinary share capital of VectraGroup Limited and 3.7% of the ordinary share capital of NMT Group PLC. Subsidiary undertakings Group Company £000 £000 Cost and Net Book Value1 January 2004 - 2,124Additions - - 31 December 2004 - 2,124 Other investments Group Company £000 £000 Cost and Net Book Value1 January 2004 - -Additions 192 192 31 December 2004 192 192 Group Company £000 £000 Listed investments included above 192 192 Aggregate market value as at 31 December 2004 172 172 11. STOCKS 2004 2003 Group Company Group Company £000 £000 £000 £000 Finished goods and goods for resale - - 5 - 12. DEBTORS 2004 2003 Group Company Group Company £000 £000 £000 £000 Trade debtors 1,643 - 1,383 -Amounts recoverable on contracts 876 - 1,231 -Amounts due from subsidiary undertaking - 69 - 636Other debtors 13 - 49 -Prepayments and accrued income 258 9 274 9 2,790 78 2,937 645 13. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 2004 2003 Group Company Group Company £000 £000 £000 £000 Trade creditors 735 128 655 32Corporation tax - - 12 -Other taxes and social security 174 - 211 -VAT payable 388 32 402 90Other creditors 263 - 277 -Accruals and deferred income 648 65 732 62 2,208 225 2,289 184 14. CALLED UP SHARE CAPITAL Company 2004 2003 £000 £000Authorised100,100,000 Ordinary shares of £0.0000001 each - -50,000 A shares of £0.49999995 each 25 2550,000 B shares of £0.49999995 each 25 254,999,999,500,000 Deferred shares of £0.00000001 each 50 50 Issued, called-up and fully paid3,638,440 ordinary shares of £0.0000001 each (2003: 3,607,720) - -49,735 A shares of £0.49999995 each (2003: 50,000) 25 2549,735 B shares of £0.49999995 each (2003: 50,000) 25 252,649,998,554 Deferred shares of £0.00000001 each (2003: nil) - - On 7 May 2004 28,985 £0.0000001 ordinary shares were issued at £1.725 each,giving rise to share premium on issue of £49,999. The A and B class shares rank pari passu with the ordinary shares on a return ofcapital and have equal voting rights. The A and B shares became capable ofbeing converted into ordinary shares at the option of the holder on or after 24December 2003 and 24 December 2004 respectively, on a predetermined conversionformula based upon share price performance, whereby 15% of the growth in marketcapitalisation of Group is attributable to the holders of the A and B shares.On 24 August 2004 265 A shares were converted into 591 ordinary shares and thethese, along with the holding of 265 ordinary shares held before conversion ofthe A shares, were redeemed by the company for a consideration of £1,455. Based on the closing share price of £1.525 at 31 December 2004, the A and Bclass shares would be capable of converting into 185,820 ordinary shares (2003:232,053). The deferred shares carry no rights to participate in the profits orassets of the Company and carry no voting rights. Option scheme Date of grant Exercise price (pence) Number Volvere plc EMI Plan 30 June 2004 187.5 78,594 31 December 2004 190.0 92,050Unapproved 13 April 2004 187.5 31,000 24 December 2002 100.0 36,097 237,741 Options granted under the Volvere plc EMI Plan vest subject to certainperformance and time-based criteria and are exercisable between 3 and 10 yearsfollowing grant. The Unapproved options granted on 13 April 2004 vest as to 10,334 on each of 8December 2004 and 8 December 2005 and 10,332 on 8 December 2006. Those grantedon 24 December 2002 can be exercised at any time until 24 December 2007. 15. SHARE PREMIUM AND RESERVES Group Profit and Share loss premium account Total £000 £000 £000 At beginning of period - 3,951 3,951(Loss) transferred for the year - (211) (211)Premium on share issues (net of expenses) 50 - 50 At end of period 50 3,740 3,790 Company Profit and Share loss premium account Total £000 £000 £000At beginning of period - 3,793 3,793Profit transferred for the year - 240 240Premium on share issues (net of expenses) 50 - 50 At end of period 50 4,033 4,083 16. RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS 2004 2003 Group Company Group Company £000 £000 £000 £000 Opening shareholders' funds 4,001 3,843 - -Issue of share capital 50 50 3,610 3,610Expenses associated with issue of share capital - - (155) (155)(Loss)/profit for the period (211) 240 546 388 Closing shareholders' funds 3,840 4,133 4,001 3,843 17. RECONCILIATION OF OPERATING (LOSS)/PROFIT TO OPERATING CASH FLOWS 2004 2003 £000 £000 Operating (loss)/profit (301) 455Depreciation 84 80Realisation of negative goodwill (60) (1,252)Loss on sale of fixed assets - 1Decrease/(increase) in stocks 5 (5)Decrease in debtors 147 1,489(Decrease)/increase in creditors (81) 588 Net cash (outflow)/inflow from operating activities (206) 1,356 18. ANALYSIS OF CASH FLOWS Group 2004 2003 £000 £000Returns on investments and servicing of financeInterest received 90 91 Net cash inflow from returns on investments andservicing of finance 90 91 Capital expenditure and financial investmentPurchase of tangible fixed assets (25) (64)Sale of tangible fixed assets 3 5Purchase of equity investment (192) - Net cash outflow from capital expenditure andfinancial investment (214) (59) Acquisitions and disposalsAcquisition of subsidiary undertaking - (2,124)Net cash acquired on acquisition of subsidiary undertaking - 564 Net cash outflow from acquisition and disposals - (1,560) FinancingIssue of share capital 50 3,610Costs associated with issue of sharecapital - (155) Net cash inflow from financing 50 3,455 Vectra Group Limited's net cash outflow from operating activities for the yearwas £907,000 (2003: inflow £1,510,000), received £12,000 (2003: £10,000) inrespect of net returns on investment and servicing of finance, paid £nil (2003:£nil) in respect of taxation and utilised £25,000 (2003: £64,000) for capitalexpenditure. 19. ANALYSIS AND RECONCILIATION OF NET FUNDS Group 31 December 31 December 2003 Cashflow 2004 £000 £000 £000 Cash in hand at bank, being net funds 3,283 (280) 3,003 The group had no debt during the year or at 31 December 2004. 20. COMMITMENTS AND CONTINGENCIES Operating leases The group has the following annual commitments under non-cancellable operatingleases: 2004 Plant and machinery Other £000 £000 Expiry date- within one year 17 175- between two and five years 88 232 105 407 21. RELATED PARTIES The company has taken advantage of the exemption available to it under FRS8paragraph 3(c) relating to transactions and balances with subsidiaries. As stated in note 3 above, the company's Executive Directors are provided underthe terms of a Service Agreement dated 19 December 2002 with Dawnay, Day LanderLimited. The amount paid under this agreement in the period amounted to£100,000. In addition, pursuant to a Facilities Agreement dated 19 December2002 with Dawnay, Day Lander Limited, the company is provided with certainadministrative and support services. The amount paid under this agreementduring the period amounted to £35,000. 22. SUBSIDIARY UNDERTAKINGS The subsidiary undertakings at 31 December 2004 are shown below. All subsidiaryundertakings are registered in the United Kingdom and prepare accounts to 31December each year. Principal Activity Holding Vectra Group Limited Provision of safety, risk and other consulting 100% and field services Vectra Partners Limited Dormant 100% Vectra (Middle East) Limited Provision of safety, risk and other consulting 100% and field services The investments in Vectra Partners Limited and Vectra (Middle East) Limited areheld by Vectra Group Limited. The proportion of voting rights held isequivalent to the equity shareholdings. This information is provided by RNS The company news service from the London Stock Exchange