Volvere Regulatory News (VLE)

27 Sep 2007 07:01

Volvere PLC27 September 2007 VOLVERE PLC INTERIM RESULTS FOR THE 6 MONTHS ENDED 30 JUNE 2007 Volvere plc ('Volvere' or 'the Company'), the turnaround investment company,announces its interim results for the 6 months ended 30 June 2007. Results The financial information for Volvere plc published in this document reflectsthe application for the first time of the new International Financial ReportingStandards ("IFRS"). There have been a number of significant changes affecting the presentation of the information, principally relating to the reversal ofpositive goodwill amortisation and negative goodwill recognition together withaccounting for the cost of share-based payments. Reconciliations of the previous UK GAAP formats to the new IFRS format are included in this interimreport. The Group's principal accounting policies are set out in the Statementof Accounting Policies in this interim report. HIGHLIGHTS • Group net assets: £7.57m (30 June 2006: £4.17m, 31 December 2006: £7.66m) of which cash represented £6.44m (30 June 2006: £1.6m, 31 December 2006: £6.54m) • Group turnover in the period: £7.19m (6 months to 30 June 2006: £6.58m, 12 months to 31 December 2006: £13.78m) • Group profit before tax: £4,000 (30 June 2006: loss £3,000, 31 December 2006: loss £125,000) • Core areas at Vectra continued to perform strongly • Sira Test and Certification and Sira Environmental performed well • Sira Defence & Security showing signs of improvement in second half • Group's financial position remains strong • Basic earnings per share 0.036p (30 June 2006: loss 0.079p, 31 December 2006: loss 3.031p); diluted earnings per share 0.035p (30 June 2006: loss 0.079p, 31 December 2006: loss 3.031p) CHAIRMAN'S STATEMENT I am pleased to report on the results for the six months ended 30 June 2007. We have continued to build and strengthen our businesses during the period andturnover has continued to grow. At the period end our net assets per sharewere £1.33. I would like to thank our management and staff for their hard work andcommitment during the period. OUTLOOK Following a good first half in 2007, our principal businesses have continued toperform in line with our expectations during the second half. Lord KalmsChairman27 September 2007 For further information, please contact: Jonathan Lander, Chief Executive OfficerVolvere plc + 44 (0) 20 7979 7596 Terry GarrettWeber Shandwick + 44 (0) 20 7067 0700 Tom HulmeLandsbanki Securities (UK) Limited + 44 (0) 20 7426 9000 CHIEF EXECUTIVE'S STATEMENT INTRODUCTIONThe performance of our principal businesses during the period was pleasing and underpins their value to the Group, which I believe to be well in excess of their book costs. OPERATING REVIEW For reporting purposes we have classified our group businesses into segments andthe results of those segments are explained in the Financial Review and thenotes to the interim report. In the interests of clarity and comparability with prior years, we have identified below the companies included within eachsegment. Safety & risk consulting This segment comprises the results of Vectra, which we believe is the largestindependent safety and risk consultancy in the UK. Vectra's track recordextends back for almost 25 years and we believe it is highly regarded by itsclients. The business continues to focus on the Oil and Gas, Transportation andNuclear markets where regulation, good practice and infrastructure spendcontinue to drive the need for Vectra's services. During the period Vectra exceeded its operating profit budget on turnover up 7%compared with the same period in 2006. All sectors are seeing buoyant marketconditions and we continue to seek new staff to accelerate this growth. Certification services This segment comprises the results of Sira Test and Certification ("STC"),acquired in September 2005, and Sira Environmental ("SEL"), acquired in March2006. During the period STC's order intake grew by 28% compared to the same period in2006. Revenue growth was lower at 11% and we have been increasing fee-earningcapacity to handle the increase in work. Consequently, although operating profits have been in line with last year, we believe we have not yet seen themaximum potential of this business. SEL continued to perform well and made an operating profit in the periodcompared to an operating loss in the 3 months following its acquisition in2006. Security solutions This segment comprises the results of Sira Defence & Security. We continue tobelieve there is long term potential in the security sector in particular andthe existing order backlog is expected to result in an improved performance in the second half of 2007. ACQUISITIONS AND FUTURE STRATEGY During the period, the Group did not make any acquisitions, other than increaseits holding in NMT. The challenge facing the Group remains to makeinvestments of the quality that we have made to date without over-paying forthem. We remain optimistic that this can be achieved and our strong balancesheet is enabling us to respond quickly to opportunities as they arise. Jonathan Lander Chief Executive27 September 2007 FINANCIAL REVIEW This Financial Review covers the Group's performance during the 6 months ended30 June 2007. It should be read in conjunction with the Chairman's and ChiefExecutive's statements. Revenue and operating performance Detailed information about the Group's segments is set out in the notes to theinterim report. Investing activities are the activities of NMT Group PLC("NMT") and Management services represents the costs of the Group's managementand central services functions. Revenue and operating results are summarisedbelow: REVENUE (Note 1) OPERATING PROFIT/(LOSS) (Note 2)SEGMENT 6 months to 30 6 months to 30 12 months to 31 6 months to 30 6 months to 30 12 months to 31 June 2007 June 2006 December 2006 June 2007 June 2006 December 2006 Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited £000 £000 £000 £000 £000 £000Safety & risk consulting 5,419 5,064 10,358 382 282 436Certification services 1,746 1,360 3,019 238 151 467Security solutions 21 - 182 (127) - (1)Investing activities - - - (30) - (58)Management services - 160 218 (575) (375) (1,034) ------- ------- ------- ------- -------- --------Total 7,186 6,584 13,777 (112) 58 (190) ======= ======= ======= ======= ======== ======== Note 1: Revenue is external revenue exclusive of intra-group sales. Note 2: Operating profit/(loss) is stated before amortisation of intangibles,intra-group charges and realisation of negative goodwill. Overall trading revenue grew by almost 12% during the period, excluding the fallin management services revenue. Management services revenue in 2006represented fees payable to Volvere by NMT when the latter was an associatecompany but which is now consolidated fully. Safety & risk consulting, which represents the results of Vectra, grew by 7%. The growth in Certification services was due to growth in Sira Test andCertification ("STC") of 11% and due to the inclusion of six months revenue fromSira Environmental ("SEL"), which was acquired at the end of March 2006. SEL'sturnover grew on a like-for-like basis by 37% in the period. Operating profits in Safety & risk consulting (being those of Vectra) reflectedthe turnover growth in that area. Operating profits in STC were in line withthe prior period, with the growth in gross margin being eroded by increased staff costs as the business increased its fee-earning capacity in response toincreased order intake, up 28% on the same period in 2006. SEL made a smalloperating profit in the period, compared with an operating loss in the period from March to June 2006. A lack of orders in the Security solutions segment has resulted in losses. However, work in hand currently is expected to result in a significantimprovement in the second half of 2007. The increase in the Management services operating loss compared to the period to30 June 2006 reflects the treatment of management fee revenue to NMT, as notedabove. In the period to 30 June 2006 NMT was an associate and therefore the fees charged to it (£160,000) were reported as Group revenues and included inthe operating result. EARNINGS PER SHARE The basic and diluted earnings per ordinary share were 0.036p and 0.035prespectively (30 June 2006: basic and diluted loss 0.079p, 31 December 2006:basic and diluted loss 3.031p). During the year the Group continued theoperation of a share option scheme in which all staff are entitled toparticipate, subject to certain conditions. NEGATIVE GOODWILL Negative goodwill of £93,000 (30 June 2006: £nil) arising on the consolidationof NMT as a subsidiary, has been credited to profit and loss during the period. In the period to 30 June 2006 an amount of £53,000 was credited to profit andloss in respect of the acquisition of the business and assets of SiraEnvironmental. AMORTISATION OF INTANGIBLES An amount of £120,000 was charged to profit and loss (30 June 2006: £120,000, 31December 2006: £240,000) in respect of the amortisation of the Group'sintangible assets. CASH MANAGEMENT Cash balances at the period end totalled £6,443,000 (30 June 2006: £1,600,000,31 December 2006: £6,540,000). The increase compared to June 2006 reflects theacquisition of NMT and the movement since December 2006 reflects the underlyingtrading in the Group's businesses. HEDGING It is not the Group's policy to enter into derivative instruments to hedgeinterest 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 andprefers to retain profits as they arise for investment in future opportunities. Nick Lander27 September 2007 CONSOLIDATED INCOME STATEMENTFor the six months ended 30 June 2007 6 months to 6 months to 12 months to 30 June 30 June 31 December 2007 2006 2006 Unaudited Unaudited Unaudited £000 £000 £000Revenue 7,186 6,584 13,777Cost of Sales (3,494) (3,270) (7,017) ---------- --------- ----------Gross Profit 3,692 3,314 6,760 Administrative expenses- before goodwill and amortisation of intangible assets (3,804) (3,256) (6,950)- amortisation of intangible assets (120) (120) (240)- realisation of negative goodwill 93 53 252 ---------- --------- ---------- (3,831) (3,323) (6,938) ---------- --------- ---------- ---------- --------- ----------Operating profit/(loss) (139) (9) (178) Share of results of associates - (65) (96)Negative goodwill arising in respect of associates - 37 44Investment revenues- Group 165 16 99- Share of associates - 38 63Finance costs (22) (20) (57) ---------- --------- ----------Profit/(loss) before tax 4 (3) (125)Tax - - - ---------- --------- ----------Profit/(loss) after tax 4 (3) (125)Minority interests (2) - 4 ---------- --------- ----------Profit/(loss) for the period 2 (3) (121) ========== ========= ========== Earnings/(loss) per ordinary share-basic 0.036p (0.079p) (3.031p)-diluted 0.035p (0.079p) (3.031p) ========== ========= ========== All results are derived from continuing operations. There are no recognised gains or losses other than the result for the currentand preceding periods. Accordingly no statement of recognised income andexpenses is given. Notes: 1. International Accounting Standards ("IFRS") will apply forthe first time to the Group's Annual report for the year ending 31 December2007. Consequently the Group's interim results for the six months to 30 June2007 are presented under IFRS together with restated information for the sixmonths ended 30 June 2006 and the year ended 31 December 2006. Furtherinformation on the Group's adoption of IFRS is given under "Explanation oftransition to IFRS" on pages 25 to 36. 2. The financial information for the six months ended 30 June2007 and the comparative figures for the six months ended 30 June 2006 have notbeen reviewed or audited by the Group's auditors and have been prepared on thebasis of the accounting policies adopted by the Group under IFRS. Theseaccounting policies are set out under 'Statement of Accounting Policies' onpages 12 to 15. 3. The unaudited comparative figures for the 12 months to 31December 2006 have been prepared under IFRS. They do not constitute statutoryaccounts within the meaning of section 240 of the Companies Act 1985. Theunqualified audited accounts for the 12 months ended 31 December 2006, underprevious UKGAAP, have been filed with the Registrar of Companies and did notcontain statements under section 237(2) or (3) of the Companies Act 1985. 4. The group has estimated an annualised effective tax rate ofnil due to deferred tax not recognised. 5. Copies of this statement will be available to members ofthe public at the company's registered office: 9-11 Grosvenor Gardens, London,SW1W 0BD and on its website www.volvere.co.uk. CONSOLIDATED BALANCE SHEETAt 30 June 2007 30 June 30 June 31 December 2007 2006 2006 Unaudited Unaudited Unaudited £000 £000 £000Non-current assetsGoodwill - - -Other intangible assets 837 1,077 957Property, plant & equipment 330 248 293Investments - 1,735 - -------- -------- -------- 1,167 3,060 1,250 -------- -------- --------Current assetsInventories - 44 -Trade and other receivables 5,058 4,452 4,743Cash and cash equivalents 6,443 1,600 6,540 -------- -------- -------- 11,501 6,096 11,283 -------- -------- -------- -------- -------- --------Total assets 12,668 9,156 12,533 ======== ======== ======== Current liabilitiesTrade and other payables (4,584) (4,385) (4,302)Current tax liabilities - - -Bank overdrafts and loans (150) (120) (150) -------- -------- -------- (4,734) (4,505) (4,452) -------- -------- -------- -------- -------- --------Net current assets 6,767 1,591 6,831Non-current liabilitiesBank loans (360) (480) (420) -------- -------- --------Total liabilities (5,094) (4,985) (4,872) ======== ======== ========Net assets 7,574 4,171 7,661 ======== ======== ======== EQUITYShare capital 50 50 50Share premium account 3,584 361 3,313Equity reserve 83 58 75Retained earnings 3,577 3,702 3,575 -------- -------- --------Equity attributable to equity holders of the parent 7,294 4,171 7,013Minority interest 280 - 648 -------- -------- --------Total equity 7,574 4,171 7,661 ======== ======== ======== CONSOLIDATED CASH FLOW STATEMENTFor the six months ended 30 June 2007 6 months to 30 6 months to 30 12 months to 31 June 2007 June 2006 December 2006 Unaudited Unaudited Unaudited £000 £000 £000Net cash from operating activities (71) 221 68 Investing activitiesInterest received 165 16 99Proceeds of disposal of property, plant and equipment - - 5Refund of consideration relating to acquisition - 87 88Purchases of property, plant and equipment (104) (70) (180)Acquisition of investment in an associate - (190) (190)Acquisition of subsidiary including associated costs (5) (31) (242)Net cash acquired of acquisition of subsidiary undertaking net of associated costs - - 5,822 -------- -------- --------Net cash from/(used in)investing activities 56 (188) 5,402 -------- -------- --------Financing activitiesInterest paid (22) (20) (57)Repayment of borrowings (60) (157) (608)New bank loans raised - 600 600Redemption of share capital - - (9) -------- -------- --------Net cash (used in)/from financing activities (82) 423 (74) -------- -------- --------Net (decrease)/increase in cash and cash equivalents (97) 456 5,396 Cash and cash equivalents at beginning of period 6,540 1,144 1,144 -------- -------- --------Cash and cash equivalents at end of period 6,443 1,600 6,540 ======== ======== ======== NOTES TO THE CONSOLIDATED CASH FLOW STATEMENTFor the six months ended 30 June 2007 6 months to 30 6 months to 30 12 months to 31 June 2007 June 2006 December 2006 Unaudited Unaudited Unaudited £000 £000 £000Operating loss (139) (9) (178) Adjustments for:Depreciation of property, plant and equipment 66 49 107Negative goodwill released to income (93) (53) (252)Amortisation of intangible assets 120 120 240Share-based payment expense 8 17 34Loss on disposal of property, plant and equipment - - 2 -------- -------- --------Operating cashflows before movements in working capital (38) 124 (47) -------- -------- --------Increase in inventories - (44) -Increase in receivables (337) (616) (896)Increase in payables 304 757 1,011 -------- -------- --------Cash generated by operations (71) 221 68 ======== ======== ======== STATEMENT OF ACCOUNTING POLICIES - UPDATED FOR IFRS Basis of accounting The interim financial report has been prepared using accounting policiesconsistent with International Financial Reporting Standards (IFRSs). Thefinancial statements have been prepared on the historical cost basis, except forthe revaluation of certain properties and financial instruments. The principalaccounting policies adopted are set out below. They have been appliedconsistently throughout the period and in the preceding periods. Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe Company and entities controlled by the Company (its subsidiaries) made up to31 December each year. Control is achieved where the Company has the power togovern the financial and operating policies of an investee entity so as toobtain benefits from its activities. On acquisition, the assets and liabilities and contingent liabilities of asubsidiary are measured at their fair values at the date of acquisition. Anyexcess of the cost of acquisition over the fair values of the identifiable netassets acquired is recognised as goodwill. Any deficiency of the cost ofacquisition below the fair values of the identifiable net assets acquired (i.e.discount on acquisition) is credited to profit and loss in the period ofacquisition. The interest of minority shareholders is stated at the minority'sproportion of the fair values of the assets and liabilities recognised.Subsequently, any losses applicable to the minority interest in excess of theminority interest are allocated against the interests of the parent.The results of subsidiaries acquired or disposed of during the year are includedin the consolidated income statement from the effective date of acquisition orup to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements ofsubsidiaries to bring the accounting policies used into line with those used bythe group. All intra-group transactions, balances, income and expenses are eliminated onconsolidation. Investments in associates An associate is an entity over which the group is in a position to exercisesignificant influence, but not control or joint control, through participationin the financial and operating policy decisions of the investee.The results and assets and liabilities of associates are incorporated in thesefinancial statements using the equity method of accounting. Investments inassociates are carried in the balance sheet at cost as adjusted bypost-acquisition changes in the group's share of the net assets of theassociate, less any impairment in the value of individual investments. Losses ofthe associates in excess of the group's interest in those associates are notrecognised. Any excess of the cost of acquisition over the group's share of the fair valuesof the identifiable net assets of the associate at the date of acquisition isrecognised as goodwill. Any deficiency of the cost of acquisition below thegroup's share of the fair values of the identifiable net assets of the associateat the date of acquisition (i.e. discount on acquisition) is credited in profitand loss in the period of acquisition. Where a group company transacts with an associate of the group, profits andlosses are eliminated to the extent of the group's interest in the relevantassociate. Losses may provide evidence of an impairment of the asset transferredin which case appropriate provision is made for impairment. Goodwill Goodwill arising on consolidation represents the excess of the costs ofacquisition over the group's interest in the fair value of the identifiableassets and liabilities of a subsidiary, associate or jointly controlled entityat the date of acquisition. Goodwill is recognised as an asset and reviewed for impairment at leastannually. Any impairment is recognised immediately in profit or loss and is notsubsequently reversed. On disposal of a subsidiary, associate or jointly controlled entity, theattributable amount of goodwill is included in the determination of the profitor loss on disposal. Goodwill arising on acquisitions before the date of transition to IFRSs has beenretained at the previous UK GAAP amounts subject to being tested for impairmentat that date. Goodwill written off to reserves under UK GAAP prior to 1998 hasnot been reinstated and is not included in determining any subsequent profit orloss on disposal. Negative goodwill arising on acquisitions is recognisedimmediately in profit or loss in the period in which it arises. Revenue recognition Revenue is measured at the fair value of the consideration received orreceivable and represents amounts receivable for goods and services provided inthe normal course of business, net of discounts, VAT and other sales-relatedtaxes. Sales of goods are recognised when goods are delivered and title has passed. Revenue earned on time and materials contracts is recognised as costs areincurred. Income from fixed price contracts is recognised in proportion to thestage of completion of the relevant contract. Leasing Rentals payable under operating leases are charged to income on a straight-linebasis over the term of the relevant lease. Foreign currencies Transactions in currencies other than pounds sterling are recorded at the ratesof exchange prevailing on the dates of the transactions. At each balance sheetdate, monetary assets and liabilities that are denominated in foreign currenciesare retranslated at the rates prevailing on the balance sheet date. Gains andlosses arising on retranslation are included in net profit or loss for theperiod. Retirement benefit costs The group's subsidiary undertakings operate defined contribution retirementbenefit schemes. Payments to defined contribution retirement benefit schemes arecharged as an expense as they fall due. The assets of the schemes are heldseparately from those of the relevant company and group in independentlyadministered funds. Taxation The tax expense represents the sum of the tax currently payable and deferredtax. The tax currently payable is based on taxable profit for the year. Taxableprofit differs from net profit as reported in the income statement because itexcludes items of income or expense that are taxable or deductible in otheryears and it further excludes items that are never taxable or deductible. Thegroup's liability for current tax is calculated using tax rates that have beenenacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amounts of assets and liabilities in the financialstatements and the corresponding tax bases used in the computation of taxableprofit, and is accounted for using the balance sheet liability method. Deferredtax liabilities are generally recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. Such assets and liabilities are not recognised if the temporarydifference arises from goodwill or from the initial recognition (other than in abusiness combination) of other assets and liabilities in a transaction thataffects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differencesarising on investments in subsidiaries and associates, and interests in jointventures, except where the group is able to control the reversal of thetemporary difference and it is probable that the temporary difference will notreverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part of the asset to berecovered. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset is realised. Deferred tax ischarged or credited in the income statement, except when it relates to itemscharged or credited directly to equity, in which case the deferred tax is alsodealt with in equity. Property, plant and equipment Fixtures and equipment are stated at cost less accumulated depreciation and anyrecognised impairment loss. Depreciation is charged so as to write off the costor valuation of assets, over their estimated useful lives, using the straightline method, on the following bases: Improvements to short-term leasehold property Over the life of the leasePlant and machinery 20%-33% Investments Investments are recognised and derecognised on a trade date where a purchase orsale of an investment is under a contract whose terms require delivery of theinvestment within the timeframe established by the market concerned, and areinitially measured at cost, including transaction costs. Investment income Income from investments is included in the income statement on an accrualsbasis, before deduction of any related tax credit. Impairment of tangible and intangible assets excluding goodwill At each balance sheet date the group reviews the carrying amounts of itstangible and intangible assets to determine whether there is any indication thatthose assets have suffered an impairment loss. If any such indication exists,the recoverable amount of the asset is estimated in order to determine theextent of the impairment loss (if any). Recoverable amount is the higher of fair value less costs to sell and value inuse. In assessing value in use, the estimated future cash flows are discountedto their present value using a pre-tax discount rate that reflects currentmarket assessments of the time value of money and the risks specific to theasset 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 tobe less than its carrying amount, the carrying amount of the asset(cash-generating unit) is reduced to its recoverable amount. An impairment lossis recognised as an expense immediately, unless the relevant asset is carried ata revalued amount, in which case the impairment loss is treated as a revaluationdecrease. Where an impairment loss subsequently reverses, the carrying amount of the asset(cash-generating unit) is increased to the revised estimate of its recoverableamount, but so that the increased carrying amount does not exceed the carryingamount that would have been determined had no impairment loss been recognisedfor the asset (cash-generating unit) in prior years. A reversal of an impairmentloss is recognised as income immediately, unless the relevant asset is carriedat a revalued amount, in which case the reversal of the impairment loss istreated as a revaluation increase. Intangible assets - customer relationships Customer relationship intangible assets, acquired in a business combination, areinitially measured at cost, based on discounted cash flows and amortised overtheir estimated useful lives of 5 years on a straight line basis. Trade receivables Trade receivables do not carry any interest and are stated at their nominalvalue as reduced by appropriate allowances for estimated irrecoverable amounts. Financial liability and equity Financial liabilities and equity instruments are classified according to thesubstance of the contractual arrangements entered into. An equity instrument isany contract that evidences a residual interest in the assets of the group afterdeducting all of its liabilities. Bank borrowings Interest-bearing bank loans and overdrafts are recorded at the proceedsreceived, net of direct issue costs. Finance charges, including premiums payableon settlement or redemption and direct issue costs, are accounted for on anaccrual basis to the profit and loss account using effective interest method andare added to the carrying amount of the instrument to the extent that they arenot settled in the period in which they arise. Trade payables Trade payables are not interest-bearing and are stated at their nominal value.Share-based payments The group has applied the requirements of IFRS 2, Share-based Payments. Inaccordance with the transitional provisions, IFRS 2 has been applied to allgrants of equity instruments after 7 November 2002 that were unvested as of 1January 2005. The group issues equity-settled share-based payments to certain employees.Equity-settled share-based payments are measured at fair value at the date ofgrant. The fair value determined at the grant date of the equity-settledshare-based payments is expensed on a straight-line basis over the vestingperiod, based on the group's estimate of shares that will eventually vest.Fair value is measured by use of a Black-Scholes pricing model. The expectedlife used in the model has been adjusted, based on management's best estimate,for the effects of non-transferability, exercise restrictions, and behaviouralconsiderations. NOTES TO THE INTERIM FINANCIAL STATEMENTS 1. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY Critical judgements in applying the Group's accounting policiesIn the process of applying the Group's accounting policies, which are set out onpages 12 to 15, management has made the following judgements that have the mostsignificant effect on the amounts recognised in the interim financial statements(apart from those involving estimations, which are dealt with below). Revenue recognition Significant amounts of the Group's revenue arise from client projects wherethere is a fixed contract value and fixed scope of work. The Group recognisesrevenue as work progresses and assesses the stage of completion in relation tothese projects. On large projects, and those spanning long periods of time,there can be a greater amount of uncertainty in relation to these projects'financial outcomes and the timing of project completion. The Group reviewsprojects' progress on a periodic basis to ensure that projects' revenues arerecognised appropriately. Key sources of estimation uncertainty Amortisation of intangible assets The Group has, in determining the value of intangible assets, estimated the cashflows expected to arise from the underlying intangible assets acquired as partof their acquisition and estimated a suitable discount rate in order tocalculate the present value thereof. The value of the Group's intangible assetsis being amortised over 5 years using the straight line method. 2. BUSINESS SEGMENTS For management purposes the group is currently organised into investingactivities and management services and a number of operating divisions. Theoperating divisions are Safety & Risk Consulting, Certification Services andSecurity Solutions. Segment information about the group's businesses ispresented below. 6 MONTHS TO 30 JUNE 2007 Safety & risk Certification Security Investing Management Eliminations Consolidated consulting services solutions activities services Total £000 £000 £000 £000 £000 £000 £000REVENUEExternal sales 5,419 1,746 21 - - - 7,186Inter-segment sales - - - - 409 (409) - ------- -------- ------- ------- ------ ------ ------Total revenue 5,419 1,746 21 - 409 (409) 7,186 ======= ======== ======= ======= ====== ====== ====== RESULTSegment result 382 238 (127) (30) (575) - (112)(Note 1) ======= ======== ======= ======= ====== ====== ====== Operating loss before goodwill and amortisation of intangible assets (112)Amortisation of intangible assets (120)Negative goodwill released to income (excluding associates) 93Share of results of associates -Negative goodwill released to income in respect of associate -Investment revenues- group 165- share of associate -Finance costs (22) ------Profit before tax 4Tax - ------Profit after 4 ====== Safety & risk Certification Security Investing Management Eliminations Consolidated consulting services solutions activities services TotalOTHER INFORMATION £000 £000 £000 £000 £000 £000 £000 Capital additions 58 40 5 - - - 103 ======= ======= ======= ======= ====== ====== ======Depreciation (39) (23) (3) - (1) - (66) ======= ======= ======= ======= ====== ====== ======Amortisation of intangible assets - (120) - - - - (120) ======= ======= ======= ======= ====== ====== ======Realisation of negative goodwill - - - - 93 - 93 ======= ======= ======= ======= ====== ====== ====== Safety & risk Certification Security Investing Management Eliminations Consolidated consulting services solutions activities services TotalBALANCE £000 £000 £000 £000 £000 £000 £000SHEET Segment assets 4,090 2,314 10 5,862 392 - 12,668(Note 2) ======= ======= ======= ======= ====== ====== ======Segmentliabilities(Note 2) (2,432) (2,193) (27) (65) (377) - (5,094) ======= ======= ======= ======= ====== ====== ====== Note 1: Segment results have been stated before tax, interest, amortisation of intangible assets and group management charges.Note 2: Segment assets and liabilities have been stated excluding inter-segment balances. 6 MONTHS TO 30 JUNE 2006 Safety & risk Certification Security Investing Management Eliminations Consolidated consulting services solutions activities services Total £000 £000 £000 £000 £000 £000 £000REVENUEExternal sales 5,064 1,360 - - 160 6,584Inter-segment sales - - - - 390 (390) - ------- -------- ------- ------- ------ ------ ------Total revenue 5,064 1,360 - - 550 (390) 6,584 ======= ======== ======= ======= ====== ====== ======RESULTSegment result 282 151 - - (375) - 58(Note 1) ======= ======== ======= ======= ====== ====== ====== Operating profit before goodwill and amortisation of intangible assets 58Amortisation of intangible assets (120)Negative goodwill released to income (excluding associates) 53Share of results of associates (65)Negative goodwill released to income in respect of associate 37Investment revenues- group 16- share of associate 38Finance costs (20) ------Profit before tax (3)Tax - ------Profit after tax (3) ====== Safety & risk Certification Security Investing Management Eliminations Consolidated consulting services solutions activities services TotalOTHERINFORMATION £000 £000 £000 £000 £000 £000 £000 Capital additions 19 51 - - - - 70 ======= ======= ======= ======= ====== ====== ======Depreciation (42) (7) - - - - (49) ======= ======= ======= ======= ====== ====== ======Amortisationof intangibleassets - (120) - - - - (120) ======= ======= ======= ======= ====== ====== ======Realisation ofnegative goodwill - 53 - - - - 53 ======= ======= ======= ======= ====== ====== ====== NOTES TO THE INTERIM FINANCIAL STATEMENTS (CONTINUED) 2. BUSINESS SEGMENTS (CONTINUED) 6 MONTHS TO 30 JUNE 2006 (continued) Safety & risk Certification Security Investing Management Eliminations Consolidated consulting services solutions activities services TotalBALANCE £000 £000 £000 £000 £000 £000 £000SHEET Segment assets 3,328 3,050 - - 2,778 - 9,156(Note 2) ======= ======= ======= ======= ====== ====== ======Segment liabilities(Note 2) (2,345) (1,883) - - (757) - (4,985) ======= ======= ======= ======= ====== ====== ====== Note 1: Segment results have been stated before tax, interest, amortisation ofintangible assets and group management charges. In response to the acquisitionsmade in late 2005 and early 2006 the Group established a central service company(Volvere Central Services Limited) with effect from 1 July 2006, to providefinancial, IT and personnel services to Group companies. Until that date theseactivities were accounted for through the results of Vectra Group Limited andtherefore formed part of the Safety and Risk Consulting segmental analysis. Inorder to present more clearly the segmentation of the Group's businesses theJune 2006 segmental analysis has been adjusted to reflect the existence of thecentral service company as though it had existed throughout the period. Note 2: Segment assets and liabilities have been stated excluding inter-segmentbalances. 12 MONTHS TO 31 DECEMBER 2006 Safety & risk Certification Security Investing Management Eliminations Consolidated consulting services solutions activities services Total £000 £000 £000 £000 £000 £000 £000REVENUEExternal sales 10,358 3,019 182 - 218 - 13,777Inter-segment sales - 12 - - 721 (733) - ------- -------- ------- ------- ------ ------ ------Total frevenue 10,358 3,031 182 - 939 (733) 13,777 ======= ======== ======= ======= ====== ====== ====== RESULTSegment result 436 467 (1) (58) (1,034) - (190)(Note 1) ======= ======== ======= ======= ====== ====== ====== Operating profit before goodwill and amortisation of intangible assets (190)Amortisation of intangible assets (240)Negative goodwill released to income (excluding associates) 252Share of results of associates (96)Negative goodwill released to income in respect of associate 44Investment revenues- group 99- share of associate 63Finance costs (57) ------Profit before tax (125)Tax - ------Profit after tax (125) ====== Safety & risk Certification Security Investing Management Eliminations Consolidated consulting services solutions activities services TotalOTHERINFORMATION £000 £000 £000 £000 £000 £000 £000 Capital additions 56 112 5 - 7 - 180 ======= ======= ======= ======= ====== ====== ======Depreciation (83) (22) (1) - (1) - (107) ======= ======= ======= ======= ====== ====== ======Amortisationof intangibleassets - (240) - - - (240) ======= ======= ======= ======= ====== ====== ======Realisation ofnegative goodwill - - - - 252 - 252 ======= ======= ======= ======= ====== ====== ====== Safety & risk Certification Security Investing Management Eliminations Consolidated consulting services solutions activities services TotalBALANCE £000 £000 £000 £000 £000 £000 £000SHEET Segment assets 3,613 2,518 24 5,866 512 - 12,533(Note 2) ======= ======= ======= ======= ====== ====== ======Segment liabilities(Note 2) (2,577) (1,811) (33) (86) (365) - (4,872) ======= ======= ======= ======= ====== ====== ====== Note 1: Segment results have been stated before tax, interest, amortisation ofintangible assets and group management charges. In response to the acquisitionsmade in late 2005 and early 2006 the Group established a central service company(Volvere Central Services Limited) with effect from 1 July 2006, to providefinancial, IT and personnel services to Group companies. Until that date theseactivities were accounted for through the results of Vectra Group Limited andtherefore formed part of the Safety and Risk Consulting segmental analysis. Inorder to present more clearly the segmentation of the Group's businesses theDecember 2006 segmental analysis has been adjusted to reflect the existence ofthe central service company as though it had existed throughout the year.Subsequent to the reporting of the results for the year ended 31 December 2006 acost of £101,000 (relating to insurance costs) has been reallocated from theManagement services segment result to the Safety and risk consulting segmentresult to better reflect those underlying segments' results and ensurecomparability with other periods in this interim report. Note 2: Segment assets and liabilities have been stated excluding inter-segmentbalances. SALES BY GEOGRAPHICAL MARKET 6 months to 30 6 months to 30 12 months to 31 June 2007 June 2006 December 2006 Unaudited Unaudited Unaudited £000 £000 £000United Kingdom 5,490 5,324 11,192Rest of Europe 897 708 1,504United States of America 399 108 119Other 400 444 962 ------- ------- --------- 7,186 6,584 13,777 ======= ======= ========= CARRYING AMOUNT OF SEGMENT ASSETS 30 June 2007 30 June 2006 31 December Unaudited Unaudited 2006 Unaudited £000 £000 £000United Kingdom 11,620 8,477 11,508Rest of Europe 410 266 414United States of America - - -Other 638 413 611 ------- ------- --------- 12,668 9,156 12,533 ======= ======= ========= ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS 6 months to 30 6 months to 30 12 months to 31 June 2007 June 2006 December 2006 Unaudited Unaudited Unaudited £000 £000 £000United Kingdom 99 67 170Rest of Europe 4 3 5United Statesof America 0 0 0Other 0 0 5 ------- ------- --------- 103 70 180 ======= ======= ========= 3. STATEMENT OF CHANGES IN EQUITY 30 June 2007 30 June 2006 31 December Unaudited Unaudited 2006 Unaudited £000 £000 £000Opening equity attributable to the equity holders of the parent 7,013 4,157 4,157Issue of share capital 271 - 2,952Shares redeemed and cancelled - - (9)Equity reserve movement 8 17 34Profit/(loss) for the period 2 (3) (121) ------- ------- --------- 7,294 4,171 7,013 ======= ======= ========= 4. EARNINGS PER SHARE The weighted average number of shares and the profit used to calculate earningsper share are given below: 30 June 2007 30 June 2006 31 December Unaudited Unaudited 2006 Unaudited Weighted average number of ordinary shares used for the purposes of basic earnings per share 5,583,626 3,786,588 3,992,054 Number of shares deemed to be issued at nil consideration pursuant to exercise of in-the-money share options - 25,031 11,092 Number of shares deemed to be issued at nil consideration under incentive share scheme 119,485 267,271 83,831 ------- ------- ---------Weighted average number of ordinary shares used for the purposes of diluted earnings per share 5,703,111 4,078,890 4,086,977 ======= ======= ========= £000 £000 £000Net profit/(loss)attributable to equity holders of the parent 2 (3) (121) ======= ======= ========= At the end of the period 5,675,232 ordinary shares (30 June 2006: 3,786,588; 31December 2006: 5,488,679) were in issue. In addition, 99,470 convertible shares(30 June 2006: 99,470; 31 December 2006: 99,470) and options for 214,401 shares(30 June 2006: 268,553; 31 December 2006: 268,553) were outstanding. For theperiod ended 30 June 2007 net profit per share is decreased by the deemedexercise of share options and the deemed issue of shares under the incentiveshare scheme since inclusion of those would result in a reduced net profit pershare. For the periods ended 30 June 2006 and 31 December 2006 the net loss pershare would decrease if shares were issued upon exercise of the share options orunder the incentive share scheme and therefore diluted net loss per share is thesame as basic net loss per share. 5. DIVIDEND The Board is not recommending payment of an interim dividend for the periodended 30 June 2007. 6. DEBTORS Debtors includes amounts recoverable under contracts of £1,241,000 (30 June2006: £1,090,000; 31 December 2006: £1,362,000). EXPLANATION OF TRANSITION TO IFRS IFRS 1 First time adoption of International Financial Reporting Standards setsout the procedures that the Group must follow as it adopts IFRS for the firsttime as the basis for preparing its consolidated financial statements. The Groupis required to establish its accounting policies as at 31 December 2007 and, ingeneral, apply these retrospectively to determine the IFRS opening balance sheetas its date of transition, 1 January 2006. The standard allows a number ofexceptions to this general principle. Those that affect the Group are set outbelow: • Use of the exemption in IFRS 3 to only restate Business Combinations arising after 31 March 2004.• IFRS 2, Share Based Payments, has been applied to all share options issued after 7 November 2002 and not vested as at 1 January 2005. Reconciliations of the adjustments to profit and loss for the reported periodsare shown below: Reconciliation of profit/(loss) for period 6 months to 30 6 months to 30 12 months to 31 June 2007 June 2006 December 2006 Unaudited Unaudited Unaudited Notes £000 £000 £000 Profit/(loss) for the period under previous UKGAAP 154 63 74Adjustments:Reversal of positivegoodwill amortisation 1 30 30 61Amortisation of intangible assets 2 (120) (120) (240)Negative goodwillreleased to income inperiod of acquisition 3 (54) 41 18Cost of share-basedpayments 4 (8) (17) (34) -------- -------- --------Profit/(loss) for the period under IFRS 2 (3) (121) ======== ======== ======== Notes 1. Reversal of positive goodwill amortisation This relates to the amortisation charged in the periods since 1 January 2006 inrespect of goodwill arising on the acquisition of Sira Test & CertificationLimited's business and assets. In accordance with IFRS 3, Business Combinations,the amount charged to income has been credited to profit and loss reserves andincluded in Intangible assets in the balance sheet. 2. Amortisation of intangible assets Amortisation of the value of intangible assets, being the net acquisition costof £1,197,000 in respect of the acquisition of Sira Test and CertificationLimited, amortised over 5 years. 3.Negative goodwill released to income in period of acquisition This relates to the negative goodwill arising on the acquisitions of SiraEnvironmental Limited's business, NMT Group PLC and Vectra Group Limited. Theamounts arising have been recognised in the periods in which they arose, inaccordance with IFRS 3, Business Combinations. 4. Cost of share-based payments (IFRS 2) The Group has quantified the cost to the group of the options granted over itsordinary shares of £0.0000001 each which have been granted since 7 November 2002and which were unvested as at 1 January 2005. More detailed analysis of the adjustments made to the Group's accounts as aresult of the transition from UKGAAP to IFRS follow. Included is areconciliation of the balance sheet as at 1 January 2006, the date of transitionto IFRS. Reconciliation of profit for the six months ended 30 June 2007 Note Previous UK Transition to IFRS GAAP Unaudited IFRS Unaudited Unaudited £000 £000 £000Revenue 7,186 - 7,186Cost of sales (3,494) - (3,494) -------- -------- -------Gross profit 3,692 - 3,692 Administrative Expenses- before goodwill (1) (3,796) (8) (3,804)- realisation of negative goodwill (2) 147 (54) 93- amortisation of positive goodwill (3) (30) 30 -- amortisation of intangible assets (4) - (120) (120) -------- -------- -------Operating profit/(loss) 13 (152) (139)Share of operating - - - results of associatesNegative goodwill arising - - - in respect of associatesInvestment revenues- Group 165 - 165- Share of associates - - -Finance costs- Group (22) - (22)- Share of associates - - - -------- -------- -------Profit before tax 156 (152) 4Tax - - - -------- -------- -------Profit after tax 156 (152) 4 Minority interests (2) - (2) -------- -------- -------Profit/(loss) for the period 154 (152) 2 ======== ======== ======= Notes: (1) The cost of £8,000 relates to the inclusion in Administration costs of the Group's estimate of the cost of share-based payments (IFRS 2) for the period.(2) The cost of £54,000 relates to the following items, adjusted in accordance with IFRS 3, Business Combinations: £000Negative goodwill relating to acquisition made prior to 1 January 2006(restated in opening reserves for that year) (12) Negative goodwill relating to acquisition in year ended 31 December2006 now restated at the value determined following acquisition to theperiod in which it arose (42) -------- (54) ======== (3) The credit of £30,000 relates to positive goodwill amortisation that would have been reported under UK GAAP but which has been reversed in accordance with IFRS 3, Business Combinations. (4) The amortisation of intangible assets is the cost of the intangible assets acquired as part of the acquisition of Sira Test and Certification Limited in 2005. The net cost of £1,197,000 is being amortised on a straight-line basis over 5 years. Reconciliation of profit for the six months ended 30 June 2006 Note Previous UK Transition to IFRS GAAP Unaudited IFRS Unaudited Unaudited £000 £000 £000Revenue 6,584 - 6,584Cost of sales (3,270) - (3,270) -------- -------- -------Gross profit 3,314 - 3,314 Administrative Expenses- before goodwill (1) (3,239) (17) (3,256)- realisation of negative goodwill (2) 12 41 53- amortisation of positive goodwill (3) (30) 30 -- amortisation of intangible assets (4) - (120) (120) -------- -------- -------Operating profit/(loss) 57 (66) (9) Share of operating results of associates (65) - (65)Negative goodwill arising in respect of associates 37 - 37Investment revenues- Group 16 - 16- Share of associates 38 - 38Finance costs- Group (20) - (20)- Share of associates - - - -------- -------- -------Profit before tax 63 (66) (3)Tax - - - -------- -------- -------Profit after tax 63 (66) (3)Minority interests - - - -------- -------- -------Profit/(loss) for the period 63 (66) (3) ======== ======== ======= Notes: (1) The cost of £17,000 relates to the inclusion in Administration costs of the Group's estimate of the cost of share-based payments (IFRS 2) for the period. (2) The credit of £41,000 relates to the following items, adjusted in accordance with IFRS 3, Business Combinations: £000Negative goodwill relating to acquisition made prior to 1 January 2006(restated in opening reserves for that year) (12) Negative goodwill relating to acquisition in period ended 30 June 2006now restated to that period and included at the value as estimated inthat period 53 -------- 41 ======== (3) The credit of £30,000 relates to positive goodwill amortisation that would have been reported under UK GAAP but which has been reversed in accordance with IFRS 3, Business Combinations. (4) The amortisation of intangible assets is the cost of the intangible assets acquired as part of the acquisition of Sira Test and Certification Limited in 2005. The net cost of £1,197,000 is being amortised on a straight-line basis over 5 years. EXPLANATION OF TRANSITION TO IFRS (CONTINUED)Reconciliation of profit for the year ended 31 December 2006 Note Previous UK Transition to IFRS GAAP Unaudited IFRS Unaudited Unaudited £000 £000 £000Revenue 13,777 - 13,777 Cost of sales (7,017) - (7,017) -------- -------- -------Gross profit 6,760 - 6,760 Administrative Expenses- before goodwill (1) (6,916) (34) (6,950)- realisation of negative goodwill (2) 234 18 252- amortisation of positive goodwill (3) (61) 61 -- amortisation of intangible assets (4) - (240) (240) -------- -------- -------Operating profit/(loss) 17 (195) (178) Share of operatingresults of associates (96) - (96)Negative goodwillarising in respect ofassociates 44 - 44Investment revenues- Group 99 - 99- Share of associates 63 - 63Finance costs- Group (57) - (57)- Share of associates - - - -------- -------- -------Profit before tax 70 (195) (125)Tax - - - -------- -------- -------Profit after tax 70 (195) (125) Minority interests 4 - 4 -------- -------- -------Profit/(loss) for the period 74 (195) (121) ======== ======== ======= Notes: (1) The cost of £34,000 relates to the inclusion in Administration costs of the Group's estimate of the cost of share-based payments (IFRS 2) for the period.(2) The credit of £18,000 relates to the following items, adjusted in accordance with IFRS 3, Business Combinations: £000Negative goodwill relating to acquisition made prior to 1 January 2006(restated in opening reserves for that year) (24) Negative goodwill relating to acquisition in year ended 31 December2006 now restated at the value determined following acquisition to the 42period in which it arose ------- 18 ======== (3) The credit of £61,000 relates to positive goodwill amortisation that would have been reported under UK GAAP but which has been reversed in accordance with IFRS 3, Business Combinations. (4) The amortisation of intangible assets is the cost of the intangible assets acquired as part of the acquisition of Sira Test and Certification Limited in 2005. The net cost of £1,197,000 is being amortised on a straight-line basis over 5 years. Reconciliation of balance sheet as at 31 December 2006 (date of latest UK GAAPfinancial statements) Notes Previous UK Transition to IFRS GAAP Unaudited IFRS Unaudited Unaudited £000 £000 £000Non-current assetsGoodwill (1) 1,136 (1,136) -Other intangible assets (1) - 957 957Negative goodwill (2) (84) 84 -Property, plant & equipment 293 - 293Investments - - - -------- -------- ------- 1,345 (95) 1,250Current assets Trade and other receivables 4,743 - 4,743Cash and cash equivalents 6,540 - 6,540 -------- -------- ------- 11,283 - 11,283 -------- -------- -------Total assets 12,628 (95) 12,533 -------- -------- -------Current liabilitiesTrade and other payables (4,302) - (4,302)Current tax liabilities - - -Bank overdrafts and loans (150) - (150) -------- -------- ------- (4,452) - (4,452) Net current assets 6,831 - 6,831Non-current liabilitiesBank loans (420) - (420) -------- -------- -------Total liabilities (4,872) - (4,872) -------- -------- -------Net assets 7,756 (95) 7,661 ======== ======== ======= EQUITYShare capital 50 - 50Share premium account 3,313 - 3,313Equity reserve (3) - 75 75Retained earnings (4) 3,745 (170) 3,575 -------- -------- -------Equity attributable to equity holders of the parent 7,108 (95) 7,013 Minority interest 648 - 648 -------- -------- -------Total equity 7,756 (95) 7,661 ======== ======== ======= Notes: 1. The goodwill recognised under UK GAAP (which was inrespect of the acquisition of the business and assets of Sira Test andCertification Limited) has been reviewed in accordance with the provisions ofIFRS3. Goodwill amortisation of £61,000, which would have been reported under UKGAAP and deducted from the goodwill balance, has been credited to profit andloss and added back to goodwill. The balance of goodwill has been determined asrelating to the cost of intangible assets and been reclassified as such.Intangible assets are being amortised over 5 years. The movements in Goodwilland Intangible assets are summarised as follows: Goodwill Intangible assets £000 £000Opening balance brought forward under UK GAAP 1,136 -Amount of goodwill amortisation under UKGAAP in period 61 -Amount transferred to Intangible assets under IFRS 3 (1,197) 1,197Amortisation of intangible assets under IFRS 3 - (240) ------- --------Closing balance carried forward under IFRS 3 - 957 ======= ======== 2. The adjustment of £84,000 in accordance with IFRS 3,Business Combinations, arises as follows: £000Negative goodwill relating to acquisition made prior to 1 January 2006(restated in opening reserves for that year) 66 Realisation of negative goodwill under UK GAAP in period (24) Negative goodwill relating to acquisition in year ended 31 December2006 now restated at the value determined following acquisition to the period in which it arose 42 -------- 84 ======== 3. This amount relates to the costs of share-based payments(IFRS 2) and comprises the following: £000Costs of share-based payments credited to equity reserve 1 January 2006 41Costs of share-based payments charged to income in period 34 -------- 75 ======== 4. This amount comprises the following: £000Negative goodwill relating to acquisition made prior to 1 January 2006(restated in opening reserves for that year) 66 Realisation of negative goodwill under UK GAAP in period (24) Goodwill amortisation written back to reserves (Note 1 above) 61 Amortisation of intangible assets (Note 1 above) (240)Negative goodwill relating to acquisition in year ended 31 December2006 now restated at the value determined following acquisition to theperiod in which it arose 42 Costs of share-based payments debited to retained earnings 1 January2006 (41) Costs of share-based payments charged to income in period (34) -------- (170) ======== Reconciliation of balance sheet as at 30 June 2006 Notes Previous UK Transition to IFRS GAAP Unaudited IFRS Unaudited Unaudited £000 £000 £000Non-current assets Goodwill (1) 1,167 (1,167) -Other intangible assets (1) - 1,077 1,077Negative goodwill (2) (107) 107 -Property, plant & equipment 248 - 248Investments 1,735 - 1,735 -------- -------- ------- 3,043 17 3,060Current assets Inventories 44 - 44Trade and other receivables 4,452 - 4,452Cash and cash equivalents 1,600 - 1,600 -------- -------- ------- 6,096 - 6,096 -------- -------- -------Total assets 9,139 17 9,156 -------- -------- -------Current liabilitiesTrade and other payables (4,385) - (4,385)Current tax liabilities - - -Bank overdrafts and loans (120) - (120) -------- -------- ------- (4,505) - (4,505)Net current assets 1,591 - 1,591 Non-current liabilitiesBank loans (480) - (480) -------- -------- -------Total liabilities (4,985) - (4,985) -------- -------- -------Net assets 4,154 17 4,171 ======== ======== =======EQUITYShare capital 50 - 50Share premium account 361 - 361Equity reserve (3) - 58 58Retained earnings (4) 3,743 (41) 3,702 -------- -------- -------Equity attributable to equity holders of the parent 4,154 17 4,171 Minority interest - - - -------- -------- -------Total equity 4,154 17 4,171 ======== ======== ======= Notes:1. The goodwill recognised under UK GAAP (which was inrespect of the acquisition of the business and assets of Sira Test andCertification Limited) has been reviewed in accordance with the provisions ofIFRS3. Goodwill amortisation of £30,000, which would have been reported under UKGAAP and deducted from the goodwill balance, has been credited to profit andloss and added back to goodwill. The balance of goodwill has been determined asrelating to the cost of intangible assets and been reclassified as such.Intangible assets are being amortised over 5 years. The movements in Goodwilland Intangible assets are summarised as follows: Goodwill Intangible assets £000 £000Opening balance brought forward under UK GAAP 1,167 -Amount of goodwill amortisation under UKGAAP in period 30 -Amount transferred to Intangible assets under IFRS 3 (1,197) 1,197Amortisation of intangible assets under IFRS 3 - (120) ------- --------Closing balance carried forward under IFRS 3 - 1,077 ======= ======== 2. The adjustment of £107,000 in accordance with IFRS 3,Business Combinations, arises as follows: £000Negative goodwill relating to acquisition made prior to 1 January 2006(restated in opening reserves for that year) 66Realisation of negative goodwill under UK GAAP in period (12)Negative goodwill relating to acquisition in period ended 30 June 2006now restated at the value as estimated in that period 53 -------- 107 ======== 3. This amount relates to the costs of share-based payments(IFRS 2) and comprises the following: £000Costs of share-based payments credited to equity reserve 1 January 2006 41Costs of share-based payments charged to income in period 17 -------- 58 ======== 4. This amount comprises the following: £000Negative goodwill relating to acquisition made prior to 1 January 2006(restated in opening reserves for that year) 66Realisation of negative goodwill under UK GAAP in period (12)Goodwill amortisation write back to reserves (Note 1 above) 30Amortisation of intangible assets (Note 1 above) (120)Negative goodwill relating to acquisition in year ended 31 December2006 now restated at the value estimated in that period 53Costs of share-based payments debited to retained earnings 1 January2006 (41)Costs of share-based payments charged to income in period (17) -------- (41) ======== Reconciliation of equity at 1 January 2006 (date of transition to IFRS) Notes Previous UK Transition to IFRS GAAP Unaudited IFRS Unaudited Unaudited £000 £000 £000Non-current assetsGoodwill 1,285 (1,285) -Other intangible assets (1) - 1,285 1,285Negative goodwill (2) (66) 66 -Property, plant & equipment 218 - 218Investments 1,535 - 1,535 -------- -------- ------- 2,972 66 3,038Current assetsInventories - - -Trade and other receivables 3,663 - 3,663Cash and cash equivalents 1,144 - 1,144 -------- -------- ------- 4,807 - 4,807 -------- -------- -------Total assets 7,779 66 7,845 -------- -------- -------Current liabilitiesTrade and other payables (3,688) - (3,688)Current tax liabilities - - -Bank overdrafts and loans - - - -------- -------- ------- (3,688) - (3,688) Net current assets 1,119 - 1,119 Non-current liabilitiesBank loans - - - -------- -------- -------Total liabilities (3,688) - (3,688) -------- -------- -------Net assets 4,091 66 4,157 ======== ======== ======= EQUITYShare capital 50 - 50Share premium account 361 - 361Equity reserve (3) - 41 41Retained earnings (4) 3,680 25 3,705 -------- -------- -------Equity attributable to equity holders of the parent 4,091 66 4,157 Minority interest - - - -------- -------- -------Total equity 4,091 66 4,157 ======== ======== ======= Notes:1. The goodwill recognised under UK GAAP (which was inrespect of the acquisition of the business and assets of Sira Test andCertification Limited) has been reviewed in accordance with the provisions ofIFRS3. The balance of goodwill has been determined as relating to the cost ofintangible assets and been reclassified as such. Intangible assets are beingamortised over 5 years. 2. The adjustment of £66,000 in accordance with IFRS 3,Business Combinations, arises as follows: £000Negative goodwill relating to acquisition made prior to 1 January 2006now restated in opening reserves for this year 66 ======== 3. This amount relates to the costs of share-based payments(IFRS 2) and comprises the following: £000Costs of share-based payments credited to equity reserve 1 January 2006 41 ======== 4. This amount comprises the following: £000Negative goodwill relating to acquisition made prior to 1 January 2006(restated in opening reserves) 66Costs of share-based payments debited to retained earnings 1 January (41)2006 -------- 25 ======== This information is provided by RNS The company news service from the London Stock Exchange