Westminster Group Regulatory News (WSG)

8 Apr 2008 07:01

Westminster Group PLC08 April 2008 8th April 2008 Westminster Group plc Preliminary announcement Westminster Group plc ('Westminster' or 'the Group'), the AIM listed supplier ofsystem solutions and products to the security, defence, fire protection andsafety markets worldwide, today announces its maiden preliminary results for the12 months to 31 December 2007. Highlights for the period • Successful admission to AIM in June 2007 and share placing raising £2.5m net;• 71% pro rata increase in revenue to £2.7million;• Increase in gross profit margin to 35.7% from 30.2%;• Significant upturn in revenue in H2;• Order book of £1.5million at year end (2006: £0.9million);• New Dubai office opened to service important Middle East market;• New agents appointed in Cameroon, Angola, Gabon, Oman, Saudi Arabia, Yemen, Malaysia Singapore, Philippines and Indonesia;• New multi lingual corporate web site launched; Commenting on the results, Peter Fowler, Chief Executive Officer, said: "This has been a very exciting year for the Westminster Group. We have achievedsignificant progress as a company through our flotation on AIM, raising ourprofile, visibility, infrastructure and customer support network. As a globalbusiness, we have further demonstrated that we can secure and deliver a widerange of cutting edge solutions to a blue chip client base across a worldmarket, often in inhospitable environments. "We feel that this is very much the beginning of what can ultimately be achievedby the Westminster Group. We have an excellent team, a growing reputation fordelivering quality solutions and a significant market opportunity." Enquiries: Peter Fowler 01295 756 300Chief Executive Officer - Westminster Group Plc Clive Carver/Charles Cunningham 020 7600 1658FinnCap Tom Cooper/Paul Vann 0117 920 0092Winningtons Financial 0797 122 1972 Chief Executive Officer's review Overview 2007 was a milestone year for the Westminster Group, the highlight of which wasour successful admission to AIM in June 2007. This has given the company theadditional resources and working capital required to exploit and capitalise onthe significant opportunities we have developed in recent years. The Group's principal activity is the design, supply and ongoing support ofadvanced technology security, defence, fire and safety solutions. Target clientsare Governments and related agencies, non-governmental organisations, militaryestablishments, airports, sea ports, banks, power stations and blue chipcommercial organisations worldwide. The results of our considerable efforts over the course of the last few years todevelop the business and expand our international reach are starting to benefitthe Group as we are increasingly emerging as a credible international securityorganisation. Our key strengths lie in our ability to offer a complete bespokeservice to clients, our broad yet detailed product knowledge and an innovativeand practical approach to developing solutions to client requirements. Our Market The market in which we operate is large and growing; it is also a wide anddiverse market with intense competition in certain areas, whilst havingunder-developed, fragmented competition in others. These latter areas are theprimary focus of our international activities. We are focused on providing niche products and services to niche markets aroundthe world, particularly in many of the emerging and third world economies. Manyof these have high security requirements but an under-developed indigenoussecurity industry and therefore look to companies such as Westminster to providethe expertise required. Competition in these areas is often extremely fragmenteddue to logistical, cultural and political complications. It is usually limitedto large multi-national companies who favour western economies, or local butless technically astute companies. Owing to the investment we have made in building up our international presenceand agency network and the strategy we have developed to capitalise on themarket opportunities that undoubtedly exist in these regions, I believeWestminster is developing a competitive advantage and is therefore well placedto achieve significant growth from the many opportunities presented. This beliefis borne out by the high level of enquiry activity we are experiencing for largescale and niche solutions, not only from our target client base, but also from anumber of the large multi-national and local indigenous security companies, whoare increasingly turning to Westminster for niche area solutions. Whilst our focus is on delivering major projects and equipment internationally,the UK nevertheless remains an important market for us. Here we are focused onniche market segments including the provision of low voltage integrated systems,predominantly in high rise-buildings. In the UK the demand for new andrefurbished high-rise developments means that there are significantopportunities for the delivery of such systems and our UK based subsidiary RMSIntegrated Solutions Ltd (RMS) is experiencing growing demand particularly withthe provision of multi-disciplinary integrated systems for example fire,security, structured cable, data networks and distributed TV. Strategy Our strategy and business model is to concentrate on niche products and servicesin niche markets around the world and in particular where competition is limitedor fragmented. Our target clients are potentially high value repeat ordercustomers with demanding performance criteria. We believe success in our target markets requires meeting exacting criteria:credibility, financial stability, professionalism, experience with ademonstrable track record and crucially, 'in-country' knowledge and connections.These, together with the political and logistical issues presented in manycountries, present a significant barrier to entry for many companies and yet,give an opportunity for those, like Westminster, who have the right credentialsand are properly structured with local support. In our opinion we have established credibility and a demonstrable track recordwith a number of successful high profile projects around the world. We have, inrecent years, devoted much of our efforts to establishing a credible worldwidenetwork of agents who can provide in-country logistics support, manpower,intelligence and critically for our clients, service support once we haveprovided the goods or services. Agents are chosen for their connections andknowledge of the country or region and for their ability to act as provide aconduit between Westminster and its target clients. In this regard, we now haveover 70 Agents in over 45 countries. In addition we have devoted much time andeffort in establishing relationships with manufacturers of niche products fromaround the world, wherever possible negotiating advantageous or exclusive rightsprior to promoting them to our target client base. We are not a manufacturer and are not therefore tied to any one single productor technology. Instead, we offer a broad range of products and services frommanufacturers all over the world. We believe that one of the key strengths ofthe Group is our ability to bring together a wide range of technologies fromdifferent sources to produce comprehensive bespoke solutions suited to clients'needs. Web Sites We have invested heavily in our international web site (www.wi-ltd.com) whichruns to hundreds of pages and is extensively used as a reference site by clientsand industry consultants alike, being one of the largest security web sites ofits type in the world. The site has tens of thousands of hits per monthgenerating a high level of enquiry activity and is an important marketing toolfor international buyers. A new multi-lingual version of the site is currentlyunder construction and will be launched later this year. I am pleased to report that in December we launched our multi-lingual new Groupweb site (www.wg-plc.com) which is fully compliant with rule 26 of the LondonStock Exchange and has been designed to provide shareholders access to a widerange of shareholder information, including an email alert system as well asacting as a portal to our various group companies and services. I am alsopleased to announce that we have recently launched our new RMS web site(www.rms-is.com), a first for this division, which will help promote our UKservices to a far wider audience. All three websites are fully interactive and provide an excellent showcase forthe Group's extensive range of products and services. Business review Our focus has been on building a professional, credible and sustainableinternational presence as a platform from which we can deliver significant longterm growth and shareholder value. The number of enquiries the Group responded to during 2007 increased by 26%.Whilst many of these are long term in nature and not all will materialise intoorders, the Board believes that the increasing rate of enquiries and "quote"activity underpins our confidence in the Group's growth prospects. The enhanced credibility of the Group has really emerged in 2007 with the Groupinvolved in late stage negotiations on a number of high profile projects in theMiddle East, Far East and Africa. A review of activities by region is given below: In Africa Our operations in Africa continue to expand with numerous new enquiries beingreceived from Governments and non-governmental agencies throughout thecontinent. We are currently working on a number of potentially high valueenquiries, some of which we are expecting a decision shortly. There are also alarge number of small to medium size projects. During the period, the Group won major projects for part of the branch networkof a leading African banking group, following the previously successfulimplementation of pilot systems to their principal offices. We have established new agent representation in Cameroon, Angola and Gabon whichis significantly developing our presence in Francophone Africa. We have alsoextended our representation in Nigeria, Kenya and Southern Sudan. In the Middle East The Group has won substantial orders to supply specialist scanning devices andequipment to various Middle Eastern agencies and a major contract to supplyperimeter detection systems to a global energy company based in Yemen. The Middle East remains an important market for the Group where we seesignificant short to medium term growth. We have established our Middle Eastoperations in the heart of the commercial centre of Dubai, in prestigiousoffices located on the 41st floor of the Emirates Towers. The office coversbusiness development opportunities and supports our agent activities in theMiddle East region. We have appointed business development staff withconsiderable industry experience and local knowledge who are already generatinga substantial level of interest including electronic surveillance and protectionfor a major airport in the region. We have extended our agent representation in the Middle East with newappointments in Oman, Saudi Arabia and Yemen and have forged a close workingrelationship with a progressive consultancy business based in Kuwait, which hasalready led to the development of some significant enquiries. The Americas We consider South America a growth area for Westminster and a region where weanticipate a significant increase in enquiries, particularly from Latin America.The expected launch of the Spanish version of the website during 2008 is animportant development as part of our development within the region. We are inthe process of identifying and appointing new agents in anticipation of this. Todate we have established agent representation in Colombia, Venezuela, Brazil,Argentina and Uruguay. During the period in question we have won several small orders from the regionbut more importantly we have generated interest and enquiries from severalpotential major projects including a specialist detection and surveillancesystem for a major airport in Colombia and several sizeable prospects for oilcompanies in the region. In Asia and Pacific The Asia and Pacific region is also a focus area for the Group where weanticipate growing demand for our services. During the year we received a large number of enquiries resulting in a number ofsignificant contract awards. The Group has secured contracts for bomb jammingequipment for the military of a Far Eastern country and secured an importantscanning equipment contract for an Asian Government department to help counterrising terrorism within that country. We have also extended our agency representation in the region with new agentsappointed in Malaysia, Singapore, Philippines and Indonesia. In UK & Europe The period in question was a particularly active time for the Group in the UKand Europe and we continued to expand our customer base in the region with abroader range of products and services and potential security solutions. During the year we have won a prestigious contract for an integrated securitysolution for a stately home, the supply of baggage handling and personnelsecurity systems to various UN entities in Eastern Europe, the supply ofsecurity equipment to HM Prisons, numerous police forces throughout the UK, theNorthern Ireland Office and many other commercial businesses. Our RMS division was extremely busy during 2007. The company provided integratedsecurity and safety solutions to a number of high rise buildings and studentaccommodation facilities including Ontario Towers, a 29 storey residentialblock, St George's medical student accommodation for 322 student bedrooms andthe 20 storey Rotunda Building, as well as many other projects. The companyended the year by securing circa £750,000 of new business in the last quarter,most of should be delivered in 2008. The development of the UK headquarters is also progressing with significantbuilding and site developments underway. These include improving the facilitiesfor visiting clients and developing the demonstration suite to cover a greaterrange of product offerings. Management & Staff We started 2007 with 26 staff which by the year end had grown to 33 reflectingour increased activity levels, including our overseas operatives. We havesignificantly strengthened the Board including the appointment of our Chairman,Sir Malcolm Ross, a new Finance Director, Nicholas Mearing-Smith, and a new NonExecutive Director, Sir Michael Pakenham, all of whom I am delighted to have onboard and all of whom have been enormously supportive. Current trading and Outlook We are now at a turning point for the business, having delivered on much of ourplans for building our international infrastructure and having secured an orderbook worth £1.5 million at 31 December 2007. We have a substantial, active quotebank and are starting to see an increasing rate at which orders are being won.This is reflected in the activity seen since the year end. In the first quarterof 2008 we have won contracts to supply multi-storey security systems, radiofrequency jamming equipment, GSM interception systems and perimeter protectiontechnology, into markets including London, Middle East, Sub Saharan Africa andKuwait. Westminster's reputation in these markets is significantly enhanced witheach contract delivered. In addition, we have received a Letter of Appointment from the Government of Southern Sudan, signed by the Minister of Transport & Roads, confirming that Westminster International Limited has been awarded the contract for extensive security enhancements at Juba Airport. The contract, valued at circa 4.7 million USD, involves the installation of a high security perimeter fence which will be protected by Westminster's FOSS fibre detection system. It will detect any attempt to cut, climb or lift the fence, together with airport surveillance cameras, a control & command system and a range of specialist scanning equipment. In the month of March alone, the Group is pleased to have announced client commitment for four large orders valued at c£3m. With resources in place to permit the development of the image of the business,clear strategic goals and objectives and continuing development of theoperational infrastructure, the Board and I are confident of a solid performancefor 2008 and exciting growth beyond. P.D. FowlerChief Executive Officer Income statement 15 month period to Year ended 31 Dec 31 Dec 2007 2006 Restated £'000 £'000 Revenue 2,744 2,011 Cost of sales (1,765) (1,404) -------- --------Gross profit 979 607 Administrative expensesGeneral (1,349) (847)IPO preparation expenses (66) - -------- --------Total (1,415) (847) -------- -------- -------- --------Loss before financing costs (436) (240) Financing costs (34) (46)Finance income 46 - -------- --------Loss before tax (424) (286) Income tax benefit 71 107 -------- --------Loss from continuing operations (353) (179) Loss on discontinued operations - (343) -------- --------Loss for the financial period (353) (522) ======== ======== Loss attributable to equity shareholders (353) (522) ======== ======== Basic and fully diluted loss per share 3.2 7.4 Balance sheet Group Group 31 Dec 31 Dec 2007 2006 Restated £'000 £'000 AssetsNon-current assetsProperty, plant and equipment 1,060 985Investments - -Deferred tax assets 181 107 -------- --------Total non-current assets 1,241 1,092 -------- -------- Current assetsInventories 61 86Trade and other receivables 884 340Cash and cash equivalents 1,588 1 -------- --------Total current assets 2,533 427 -------- -------- -------- --------Total assets 3,774 1,519 ======== ======== Shareholders' equityIssued capital 1,402 713Share premium 2,304 -Share based payment reserve 11 -Revaluation reserve 265 253Retained earnings (741) (388) -------- --------Total equity 3,241 578 -------- -------- LiabilitiesNon-current liabilitiesInterest bearing loans and borrowings - 16Deferred tax liabilities 52 64 -------- --------Total non-current liabilities 52 80 -------- -------- Current liabilitiesInterest bearing loans and borrowings 14 606Trade and other payables 467 255 -------- --------Total current liabilities 481 861 -------- -------- Total liabilities 533 941 -------- --------Total equity and liabilities 3,774 1,519 ======== ======== Consolidated cash flow statement Group Group Year to 15 months to 31 Dec 31 Dec 2007 2006 Restated £'000 £'000Cash flows from operating activities Loss for the financial period (353) (522)Income tax benefit (71) (107)Finance income (46) -Finance costs 34 46Depreciation and amortisation 37 62Increase in inventories 25 65(Increase)/decrease in trade and other receivables (541) 733 744Increase/(decrease) in trade and other payables 212 (449) (450)Negative goodwill - (12)Share-based payment 8 -Interest paid (34) (46)Interest received 44 -Tax paid - (2) -------- --------Net cash used from operating activities (685) (232) -------- -------- Cash flows from investing activitiesPurchase of property, plant and equipment (112) (60)Proceeds from disposal of property, plant andequipment - 14Acquisition of subsidiary net of cash acquired - (27) -------- --------Net cash used in investing activities (112) (73) -------- -------- Cash flows from financing activitiesGross proceeds from the issue of ordinary sharecapital 3,377 - -Proceeds from payment of part paid shares - 38IPO costs paid (575) -Loans from Directors 96 49Finance lease repayments (4) (2) -------- --------Net cash generated from financing activities 2,894 85 -------- -------- Net change in cash and cash equivalents 2,097 (220) Cash and cash equivalents at start of period (509) (289) -------- --------Cash and cash equivalents at end of period 1,588 (509) ======== ======== Consolidated statement of changes in equity for the year ended 31 December 2007 Share Ordinary Share based share premium payment Revaluation Retained capital account reserve reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000 Balance at 30 September 2005 675 - - 216 134 1,025 Loss for period fromcontinuing activities(restated) - - - - (179) (179) Loss for period fromdiscontinued activities - - - - (343) (343) Revaluation ofnon-current assets - - - 49 - 49 Deferred tax liability onrevaluation of non-current assets - - - (12) - (12) ------- ------- ------- -------- ------- -------Total recognised incomeand expense for the period - - - 37 (522) (485) ------- ------- ------- -------- ------- ------- Proceeds from payment ofpart paid shares 38 - - - - 38 ------- ------- ------- -------- ------- -------Total recognisedchanges in equity forthe period 38 - - - - 38 ------- ------- ------- -------- ------- ------- Balance at 31 December 2006 713 - - 253 (388) 578 Loss for period fromcontinuing activities - - - - (353) (353) ------- ------- ------- -------- ------- -------Total recognisedincome and expense forthe period - - - - (353) (353) ------- ------- ------- -------- ------- ------- Directors loans convertedinto ordinary share capital 191 - - - - 191 Share capitalissued for cash 498 2,879 - - - 3,377 Expenses in connectionwith IPO - (575) - - - (575) Share based payments - - 8 - - 8 Deferred tax adjustments - - 3 12 - 15 ------- ------- ------- -------- ------- -------Total recognisedchanges in equity forthe period 689 2,304 11 12 - 3,016 ------- ------- ------- -------- ------- ------- Balance at 31 1,402 2,304 11 265 (741) 3,241December 2007 Notes 1. Preliminary announcement This preliminary announcement was approved by the directors on 7 April 2008. The financial information set out above does not constitute the Company'sstatutory financial statements for the year ended 31 December 2007 but isderived from those financial statements. The comparative figures are those of the financial statements for the fifteen month period ended 31 December 2006. The statutory financial statements for the year ended 31 December 2007 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The financial information contained in this Preliminary Statement does notconstitute statutory accounts. 2. Segmental information (i) Business segments For management purposes, the Group has been organised into three operatingdivisions: (a) Advanced technological;(b) Low voltage systems; and(c) Manufacturing These segments are the basis on which the Group reports its primary segmentinformation. In the period ended 31 December 2006 the Group disposed of iselectronic manufacturing division. Segment information about these businesses is presented below: Advanced Low voltage technological systems Manufacturing Unallocated Group Continuing Continuing Discontinued Continuing £'000 £'000 £'000 £'000 £'00015 month period ended 31 December 2006Supply of goods 1,456 774 148 - 2,378Supply of services - 58 - 14 72Intersegment sales (291) - - - (291) --------- --------- --------- --------- ---------Gross revenue 1,165 832 148 14 2,159Discontinued activities - - (148) - (148) --------- --------- --------- --------- ---------Revenue 1,165 832 - 14 2,011 --------- --------- --------- --------- --------- Segment result 10 (24) (343) (226) (583)Net finance costs (14) (5) - (27) (46)Income tax benefit 87 20 - - 107 --------- --------- --------- --------- ---------Profit/(loss) for thefinancial period 83 (9) (343) (253) (522) --------- --------- --------- --------- ---------------------- --------- --------- --------- --------- ---------Segment assets 342 190 - 987 1,519------------- --------- --------- --------- --------- ---------Segment liabilities 195 121 77 548 941------------- --------- --------- --------- --------- --------- Capital expenditure 16 2 - 42 60 Depreciation 18 8 22 14 62------------- --------- --------- --------- --------- --------- Advanced Low voltage technological systems Manufacturing Unallocated Group Continuing Continuing Discontinued Continuing £'000 £'000 £'000 £'000 £'000Year ended 31 December 2007Supply of goods 2,111 713 - - 2,824Supply of services 11 86 - 6 103Intersegment sales (146) (37) - - (183) --------- --------- --------- -------- ---------Revenue 1,976 762 - 6 2,744 --------- --------- --------- -------- --------- Segment result (70) (3) - (363) (436)Net finance income (9) (3) - 24 12Income tax benefit 68 1 - 2 71 --------- --------- --------- -------- ---------Loss for the financial year (11) (5) - (337) (353) --------- --------- --------- -------- ---------------------- --------- --------- --------- -------- ---------Segment assets 1,404 241 - 2,129 3,744------------- --------- --------- --------- -------- ---------Segment liabilities 263 80 - 189 533------------- --------- --------- --------- -------- --------- Capitalexpenditure 51 1 - 60 112Depreciation 16 9 - 12 37------------- --------- --------- --------- -------- --------- (ii) Geographical segments The Group's international business is conducted on a global scale, with agentspresent in all major continents. The following table provides an analysis of theGroup's sales by geographic market, irrespective of the origin of the goods/services: Group Group 31 December 31 December 2007 2006 £'000 £'000 United Kingdom 1,507 998Asia 847 757Africa 244 224Europe 146 18South America - 8Australasia - 6 --------- --------- 2,744 2,011 ========= ========= 3. Loss per share Basic loss per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary sharesoutstanding during the year. The weighted average number of ordinary shares is calculated as follows: Group Group Year ended Year ended 31 December 31 December 2007 2006 '000 '000Issued ordinary sharesStart of period 7,125 6,750Effect of shares issued during the period 4,046 300 --------- ---------Weighted average number of shares for period 11,171 7,050 ========= ========= The calculation of weighted average number of shares issued in the year ended 31December 2006 potentially results in a distorted view of loss per share due tothe consolidation of the Company's share capital in April 2007. Therefore, forthe purposes of this calculation, the consolidation of the Company's sharecapital has been deemed to have been effective throughout. Basic and fully diluted loss per share is calculated as follows: Group Group Year ended Year ended 31 December 31 December 2007 2006 £'000 £'000 Loss for the year attributable to equityshareholders of the Company (353) (522) Weighted average number of shares 11,171 7,050 Loss per share (pence) 3.2 7.4 ========= ========= There is no difference between basic and fully diluted loss per share as theinclusion of the share options in the calculation of the weighted average numberof shares would have the effect of reducing the loss per share. The potentialdilutive effect on the weighted average number of ordinary shares would be toincrease the weighted average number of ordinary shares by 377,812 shares andsolely comprises the dilutive effect of the share options issued under the shareoption scheme. 4. Reserves Share based Revaluation Retained Total payment reserve reserve earnings £'000 £'000 £'000 £'000At 1 October 2005 - 216 134 350Total recognisedincome and expense - - (522) (522)Revaluation increase - 49 - 49Deferred tax arising from revaluation - (12) - (12) -------- -------- -------- --------At 31 December 2006 - 253 (388) (135) ======== ======== ======== ======== At 1 January 2007 - 253 (388) (135)Total recognisedincome and expense - - (353) (353)Share based payments 8 - - 8Deferred tax adjustments 3 12 - 15 -------- -------- -------- --------At 31 December 2007 11 265 (741) (465) ======== ======== ======== ======== 5. Transition to IFRS The transition from UK GAAP to IFRS has been made in accordance with IFRS 1,First-time doption of International Financial Reporting Standards ("IFRS 1").Set out below are the UK GAAP to IFRS equity reconciliations for the Group andthe Company at 30 September 2005 (date of transition) and 31 December 2006 (lastfinancial statements under UK GAAP) and profit reconciliation for the 15 monthperiod ended to 31 December 2006. There is no material effect of transition onthe cash flow statement other than reclassifications. Balance sheet Group Note UK GAAP Effect of IAS 8 IFRS 30 Sep transition Adjustment 30 Sep 2005 2005 £'000 £'000 £'000 £'000 -------Non-current assetsProperty, plant andequipment a 862 96 - 958 -------- -------- -------- -------- 862 96 - 958 Current assets 958 - - 958 -------- -------- -------- --------Total assets 1,820 96 - 1,916 ======== ======== ======== ======== EquityShare capital 675 - - 675Revaluation reserve a 198 44 - 242Retained earnings 134 - - 134 -------- -------- -------- -------- 1,007 44 - 1,051 -------- -------- -------- --------Non-current liabilitiesInterestbearing loans and borrowings 34 - - 34Deferred tax liability b - 52 - 52 -------- -------- -------- -------- 34 52 - 86 Current liabilities 779 - - 779 -------- -------- -------- --------Total liabilities 813 52 - 865 -------- -------- -------- -------- Total equity andliabilities 1,820 96 - 1,916 ======== ======== ======== ======== Group Note UK GAAP Effect of IAS 8 IFRS 31 Dec transition Adjustment 31 Dec 2006 2006 £'000 £'000 £'000 £'000 -------Non-current assetsProperty, plant andequipment a 866 119 - 985Deferred tax asset b - - 107 107 -------- -------- -------- -------- 866 119 107 1,092 Current assets 427 - - 427 -------- -------- -------- --------Total assets 1,293 119 107 1,519 ======== ======== ======== ======== EquityShare capital 713 - - 713Revaluation reserve a 198 55 - 253Other reserves 12 (12) - -Retained earnings (506) 12 107 (387) -------- -------- -------- -------- 417 55 107 579 -------- -------- -------- --------Non-current liabilitiesInterestbearing loansand borrowings 15 - - 15Deferred tax liability b - 64 - 64 -------- -------- -------- -------- 15 64 79 Current liabilities 861 - - 861 -------- -------- -------- --------Total liabilities 876 64 - 940 -------- -------- -------- -------- Total equity andliabilities 1,293 119 107 1,519 ======== ======== ======== ======== Income statement Group UK GAAP Effect of IAS 8 IFRS 15 month period transition Adjustment 31 Dec ended 31 Dec 2006 2006 £'000 £'000 £'000 £'000 Revenue 2,159 (148) - 2,011 Cost of sales (1,582) 178 - (1,404) -------- -------- -------- --------Gross Profit 577 30 - 607 Administrative expenses (1,160) 313 - (847) -------- -------- -------- --------Loss beforefinancing costs (583) 343 - (240) Financing costs (46) - - (46)Finance income - - - - -------- -------- -------- --------Loss before tax (629) 343 (286) Income taxbenefit c - - 107 107 -------- -------- -------- --------Loss continuingoperations (629) 450 107 (179) Loss on discontinuedactivities - (343) - (343) -------- -------- -------- --------Loss for thefinancial year (629) - 107 (522) ======== ======== ======== ======== Loss attributable to:Equity holdersof the Group c (629) - 107 (522)Minority interest - - - - -------- -------- -------- -------- (629) - 107 (522) ======== ======== ======== ======== A reconciliation of cash flow statements has not been presented as the cash flowstatements were unaffected by the transition to IFRS. Notes a. Revaluation of land and buildings Under UK GAAP, land and buildings held for use in the production or supply ofgoods or services, or for administrative purposes, are stated in the balancesheet at their re-valued amounts; being the fair value on the basis of theirexisting use at the date of revaluation. Under IFRS, the carrying value ispermitted to be the market value, deemed to be the highest possible price thatcould be obtained for the land and buildings. Accordingly, if valued forresidential purposes the valuation would have been an amount in excess of thecommercial fair value. The excess valuation was credited, net of deferred taxliabilities to the revaluation reserve. b. Deferred tax Under IFRS, deferred tax is recognised in respect of all temporary differencesarising between the tax base and the accounting base of balance sheet items.This means deferred tax is recognised on certain temporary differences thatwould not have given rise to deferred tax under UK GAAP. IFRS also requiresseparate disclosure of deferred tax assets and liabilities on the face of thebalance sheet. Under UK GAAP the deferred tax liability on the revaluation of the freeholdproperty would not have been recognised unless there was a binding agreement todispose of the property and if it was more likely than not that the taxable gainwould be rolled over into replacement assets and charged to tax only where thereplacement assets are sold. Under IFRS, a full provision is recognisedirrespective of intent. The deferred tax liability is not recognised in theincome statement as the Company has adopted a policy of revaluation of thefreehold property, recognising the deferred taxation charge in equity. c. IAS 8 (Accounting Policies, changes in accounting estimates and errors)adjustment In the IFRS historic financial information published in the Admission Document,a deferred tax benefit was recognised in the period to 31 December 2006 of£107,000, which was not recognised in the UK GAAP financial statements for thatperiod due to omission. This information is provided by RNS The company news service from the London Stock Exchange