Final Results

Embargoed Release: 07:00hrs Monday 23 June 2008 International Brand Licensing Plc ("IBL", the "Company" or the "Group") Final Results for the Year Ended 31 December 2007 International Brand Licensing plc, the branded sports lifestyle company, announces its final results for the period ended 31 December 2007. Copies of the Report and Accounts are being posted to shareholders today. Chairman's Statement The Group experienced a very challenging year in 2007, but despite an extremely difficult retail environment we closed the year in a strong position and with the business model that was originally intended when the Company was de-merged onto AIM in 2002. At the year end we had in excess of £1.4m of cash in the bank which we anticipate will grow during 2008 as we receive further deferred territorial payments. We are currently in advanced discussions to sell a further three territories for the Admiral brand which, if concluded, will further enhance the Group's cash reserves. We will keep shareholders fully informed of these developments in due course. Having withdrawn from the capital intensive sports retail supply business we have emerged as a streamlined intellectual property sporting brands Company, with licensing revenue from over twenty territories. During 2007 we took the opportunity of assigning the England cricket sponsorship agreement one year early in return for a £1.6 million payment from adidas. However, due to a massive downturn in the UK sporting goods market and a real decline in the demand for cricket replica kit, coupled with our withdrawal from the market, sales of our cricket merchandise decreased to £ 1,516,000 compared to £2,644,000 in 2006. In addition a stock write off of £ 292,000 was necessary on the England replica merchandise that was cleared as the sponsorship agreement terminated early. Furthermore, we have also included in the 2007 results additional charges incurred by our withdrawal from the England cricket sponsorship and the wholesale trading including staff redundancies and the investment we have made in the development and marketing of the Muscle Athletic brand. Licensing revenue was £348,000 compared to £433,000 in 2006, the decrease almost entirely due to the sales shortfall in the depressed UK market. However, during the year we appointed four new Admiral licensees, the most notable one being for China, Hong Kong and Macau. These new partners will only begin to generate revenues in 2008 and beyond, and during the year ahead we are very confident that we will further expand Admiral's distribution by signing additional agreements for new territories and product categories. In 2007 we started developing Muscle Athletic which we had acquired late in 2006, and as a result of this, the brand was successfully launched in February 2008 this year at MAGIC, the world's most important fashion and lifestyle exhibition. The brand received a very positive reaction at the show and we are now progressing discussions with a number of candidate licensees, which we aim to sign during 2008 and 2009. In the event that the Admiral brand is sold we believe that Muscle Athletic will become its replacement. We have now succeeded in restructuring the Company into the financial and operational position that we have strived for in recent years. We are no longer reliant on the sports retail trade as a significant proportion of our ongoing revenues is now secured by guarantees. Furthermore we will continue to seek opportunities to strengthen the balance sheet and enhance shareholder value going forward. Adam Reynolds Chairman 23 June 2008 Report of the Directors The Directors have pleasure in submitting this report together with the financial statements of International Brand Licensing plc for the year ended 31 December 2007. Directors The Directors who held office during the year were as follows: Tony Hutchinson, Chief Executive (aged 57) Tony held a number of senior management positions in sales and marketing at Coats Viyella plc between 1973 and 1988 when he left to join Umbro International limited. In 1990 he was appointed to the executive board and in 1992 moved to Italy as managing Director of Umbro Italia. On returning to the UK in 1993 he assumed responsibility for the three Umbro subsidiaries in Italy, Germany and France as well as European Licensing Operations. In 1995 he was appointed Director of International Licensing for Europe and Asia, and in 1997 became Head of Global Licensing responsible for all licensee markets worldwide. In 2000 he was appointed Chief Executive of Hay & Robertson International Licensing AG and became Chief Executive of International Brand Licensing plc upon its incorporation in 2002. Paul Foulger, Finance Director(aged 38) Paul has considerable public and private Company experience, having been a Director of a number of successful businesses as well as being involved in a large variety of corporate transactions over the years including acting as finance director in the reversal of FirstAfrica Oil plc into Financial Development Corporation plc. Paul previously worked in the publishing industry with Harper Collins Publishers and subsequently became finance director at Elsevier Science, a subsidiary of Reed Elsevier plc. He led a management buy-out of previously quoted financial communications Group Hansard in 2004, of which he remains a Director. He also consulted on the listing of Table Mountain Minerals plc in 2005 and its subsequent acquisition by Plectrum Petroleum plc. In 2005, he became a Director of Cielo Holdings plc, now called Curidium Medica plc, and successfully completed an acquisition of Curidium Ltd in 2006. He holds several other Directorships including TSE Group plc and Wilton International Management Group. Paul is a qualified certified accountant and is currently completing his MBA at Warwick Business School. Adam Reynolds, Non-executive Chairman(aged 45) Adam began his career as a stockbroker in 1980, working first with Rowe Rudd and then Jacobson & Townsley as a commission salesman. In 1983, he established the London office of John Siddall & Son, becoming a Director in 1987. In 1988, he brokered the sale of that office to Branston & Gothard, where he headed up the UK equity sales team, which he had brought with him, for the next five years. He remained at Branston & Gothard as a UK equity salesman until 1998, when he joined Basham & Coyle, a financial PR firm as Director in charge of investor relations, specialising in developing the PR strategies of smaller Companies. In February 2000, he established Hansard Group plc, a financial PR firm, listing it on AIM in November 2000, before successfully leading a management buy-out of the business in 2004 at which time Hansard Group acquired a major division of Energem Resources Inc. which changed its name to FirstAfrica Oil plc. Adam is also a Director of TSE Group plc. Gordon Hall, Non-Executive Director(aged 65) Gordon has held a number of high profile board positions within both private and public Companies. He is currently a non executive Director of both Evolutec Ltd and Osmetech plc. Previous Directorships include Ntera Ltd, Plectrum Petroleum plc, Bio Stat Ltd, Shield Diagnostics plc and Andaris Ltd. Principal Activities and Business Review The principal activity of the Group is the development and exploitation of a portfolio of sports and lifestyle brands, trademarks, trade names and logos. The Group seeks to exploit the value of its brands by granting licences to third parties authorising the manufacture, marketing and sale of specified licensed products for a fixed term by reference to a particular territory. In the UK the marketing and sale of some licensed products is performed by a Group Company. Group turnover decreased by 40% to £1,857,000 (2006: £3,077,000). The reduction in revenue was due to a decline in the Admiral England cricket replica sales. This was due to a combination of factors not least the team's recent poor performance and a generally depressed UK sports retail sector. Against this backdrop, the board decided to take advantage of an offer to terminate its exclusive Admiral England Cricket Board (ECB) sponsorship one year early, as at 31 March 2008 in return for a cash consideration of £1.6 million and a reduction in royalties to the ECB. The Group made a profit before tax for the year ended 31 December 2007 of £ 615,000 (2006: profit of £582,000) with basic earnings per share after exceptional items of 1.4 pence (2006: 1.8 pence). The balance sheet shows the Group's financial position remains strong with total assets of £5.6 million (2006 - £5.1 million) and net assets of £5 million (2006 - £4.3 million). Future Outlook The Group will continue to grow the Admiral and Muscle Athletic brands by negotiating new geographic territories with new Licensees as well as by encouraging existing Licensees to increase revenue. Key Performance Indicators ( "KPIs") The Group's Directors are of the opinion that the following KPIs are relevant 2007 2006 £'000 £'000 Turnover £1,857 £3,077 Operating profit £572 £586 Operating profit %: 30.8% 19.0% Number of Staff: 8 8 Principal risks and uncertainties The Directors continually identify, monitor and manage the risks and uncertainties of the Group. Risk is inherent in all businesses. Set out below are certain risk factors which could have an impact on the Group's long term performance. This list does not purport to be an exhaustive summary of the risks affecting the Group. * Licensee relationships The Group is reliant on developing its relationships with its licensees. The success of the Group depends on the relationships established with those licensees. * Management and Employees The success of the Group depends to a significant extent on key Directors and employees. The loss of one or more of these people could have an adverse effect on the Group. * Dilution of existing shareholders Should the Directors decide that the Group needs to issue new Ordinary Shares, in so far as such new Ordinary Shares are not offered first to existing Shareholders, then their interests would be diluted. * Political risk A significant proportion of IBL's revenues are accounted for by agreements with licensees in various countries. Any instability in those countries could affect operations. * Currency Risk A significant proportion of the Group's revenues and costs are denominated in local licensee currencies. Accordingly, financial operations could be adversely affected by exchange rate volatility which could result in a shortfall for the year. * Considerations relating to future prospects IBL has a number of Licensee agreements in place. They are terminable on notice (the periods of which vary) and there can be no guarantee that licensees will not withdraw from such agreements in the future. Creditors Payment Policy It is the policy of the Group to agree appropriate terms and conditions for its transactions with suppliers (ranging from standard written terms to individual negotiated contracts) and for payment to be made in accordance with these terms provided the supplier has complied with its obligations. The average number of day's credit taken by the Group as at the 31 December 2007 was 45 days (2006: 42 days). Environment The Directors consider that the nature of the Group's activities is not inherently detrimental to the environment. Employees The Group places value on the involvement of its employees and they are regularly briefed on the Group's activities. The Group closely monitors staff attrition rates which it seeks to maintain at current low levels and aims to structure staff compensation levels at competitive rates in order to attract and retain high calibre personnel. Disabled employees Applications for employment by disabled persons are always fully considered, bearing in mind the specific aptitudes of the applicant involved. It is the policy of the Group that the training, career development and promotion of disabled persons, as far as possible, be identical with that of other employees. Dividends The Directors have not paid or declared a dividend for the year ended 31 December 2007 (31 December 2006 - nil). For the foreseeable future, the Group intends to retain any future earnings for the business and therefore the Group does not anticipate paying dividends in the short term. Directors' Interests The interests of those Directors serving at 31 December 2007, all of which are beneficial, in the share capital of the Company were as follows: On 31 December 2007 On 31 December 2006 Ordinary Shares of 1p each Ordinary Shares of 1p each A Hutchinson 48,194 48,194 A Reynolds 187,500 187,500 P Foulger 70,000 70,000 G Hall - - Substantial Shareholdings As at 23 June 2008, the following interests in 3% or more of the issued ordinary share capital had been notified to the Company. Shareholder Number Percentage of issued of shares share capital HSBC Global Custody Nominee (UK) Ltd 7,153,693 21.29% BH01883031 Euroclear Nominees Ltd 56XKK EOC01 5,030,000 14.97% JM Finn Nominees Ltd 3,656,688 10.89% Lance Yates Esq (Estate of) 1,708,480 5.09% ODI Nominees Ltd 558 ODLCLT 1,222,778 3.64% James Capel (Nominees) Ltd 118 1,127,291 3.36% HSBCSS Statement of Directors' Responsibilities The Directors are responsible for preparing the Annual Report and financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the Group and of the profit or loss of the Group for that period. The Company's shares are traded on the AIM Market of the London Stock Exchange, the rules of which are that the Directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. In preparing these financial statements, the Directors are required to: * select suitable accounting policies and then apply them consistently. * make judgements and estimates that are reasonable and prudent. * state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements. * prepare the financial statements on a going concern basis unless it is inappropriate to assume that the Group will continue in business. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and to enable them to ensure that the financial statements comply with the Companies Acts and International Financial Reporting Standards as adopted by the European Union. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions Auditors A resolution proposing that Gerald Edelman be reappointed as auditors of the Company will be put to the Annual General Meeting. Disclosure of information to the Auditors The Directors who hold office at the date of approval of this report confirm that so far as they are each aware, there is no relevant audit information of which the Company's auditors are unaware, and each Director has taken all the steps that he ought to have taken as a Director in order to make him aware of any relevant audit information and to establish that the Company's auditors are aware of that information. Annual General Meeting The resolutions to be proposed at the forthcoming Annual General Meeting are set out in the formal notice of the meeting, as set out on page 40. Recommendation The Board considers that the resolutions to be proposed at the Annual General Meeting are in the best interests of the Company and it is unanimous recommendation that shareholders support these proposals as the Board intends to do in respect of their own holdings. The Directors' report was approved by the Board on 23 June 2008 and signed on its behalf by: Paul Foulger Director Corporate Governance Statement Compliance The Directors recognise the value of the principles of the Combined Code on Corporate Governance ("the Combined Code"). Although, as an AIM Company, compliance with the Combined Code is not required the Group seeks to apply the Combined Code where practicable and appropriate for a Company of its size. The following statement describes how the Group as at 31 December 2007 sought to address the principles underlying the Combined Code. Board Composition and responsibility The Board currently comprises two executive Directors and two non-executive Directors. The Board notes that the Combined Code guidance recommends that at least half the Board should comprise independent non-executive Directors. The Board has determined that Adam Reynolds and Gordon Hall are independent in character and judgement and that there are no relationships or circumstances which could materially affect or interfere with the exercise of their independent judgement. The Board is satisfied with the balance between executive and non-executive Directors which allows it to exercise objectivity in decision making and proper control of the Company's business. The Board considers its composition is appropriate in view of the size and requirements of the Group's business and the need to maintain a practical balance between executives and non-executives. Due to the structure of the Company it is considered that it is not appropriate to change the successful Board composition at present. All Directors are subject to election by shareholders at the first Annual General Meeting after their appointment, and are subject to re-election at least every three years. Non-executive Directors are appointed for a specific term of office which provides for their removal in certain circumstances, including under section 168 of the Companies Act 2006. The Board does not automatically re-nominate non-executive Directors for election by shareholders. The terms of appointment of the non-executive Directors can be obtained by request to the Company Secretary. The Board's primary objective is to focus on adding value to the assets of the Group by identifying and assessing business opportunities and ensuring that potential risks are identified, monitored and controlled. Matters reserved for Board decisions include strategic long-term objectives and capital structure of major transactions. The implementation of Board decisions and day to day operations of the Group are delegated to Management Board Meetings 10 board meetings were held during the period. The Director's attendance record during the period is as follows: Tony Hutchinson (Chief Executive) 9 Paul Foulger (Finance Director) 10 Adam Reynolds (Non-Executive Chairman) 9 Gordon Hall (Non-Executive Director) 10 Audit Committee This comprises two non-executive Directors, Gordon Hall (Chairman) and Adam Reynolds. The principal duties of the committee are to review the half-yearly and annual financial statements before their submission to the Board and to consider any matters raised by the auditors. The Committee also reviews the independence and objectivity of the auditors. The terms of reference of the Committee reflect current best practice, including authority to: • Recommend the appointment, re-appointment and removal of the external auditor • Ensure the objectivity and independence of the auditors including occasions when non-audit services are provided • Ensure appropriate 'whistle-blowing' arrangements are in place The non-executive Directors may seek information from any employee of the Group and obtain external professional advice at the expense of the Company if considered necessary. Due to the relatively low number of personnel employed within the Group, the nature of the business and the current control and review systems in place, the Board has decided not to establish a separate internal audit department. Remuneration Committee The Company has established a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual Directors. No Director is involved in deciding his own remuneration. The remuneration committee is made up of Gordon Hall (Chairman) and Adam Reynolds. The committee considers the employment and performance of individual executive Directors and determines their terms of service and remuneration. It also has authority to grant options under the Company's Executive Share Option Scheme. The Committee meets at least once a year. The Board of Directors has considered the appointment of a separate Nomination Committee, as recommended by the combined code. However due to the size and nature of the Company, this function is carried out by the Remuneration Committee with the non-executive Chairman. There is a division of responsibilities between the non-executive Chairman, who is responsible for the overall strategy of the Group and the CEO, who is responsible for implementing the strategy and day to day running of the Group. He is assisted by the Finance Director. Board appointments The appointment of Directors is overseen by the full Board. There is no formal nominations committee, the appointment of new Directors being considered by the full Board. Internal Control The Directors are responsible for ensuring that the Group maintains a system of internal control to provide them with reasonable assurance regarding the reliability of financial information used within the business and for publication and that the assets are safeguarded. There are inherent limitations in any system of internal control and accordingly even the most effective system can provide only reasonable, but not absolute, assurance with respect to the preparation of financial reporting and the safeguarding of assets. The Group, in administering its business has put in place strict authorisation, approval and control levels within which senior management operates. These controls reflect the Groups organisational structure and business objectives. The control system includes clear lines of accountability and covers all areas of the organisation. The Board operates procedures which include an appropriate control environment through the definition of the above organisation structure and authority levels and the identification of the major business risks. Internal financial reporting The Directors are responsible for establishing and maintaining the Group's system of internal reporting and as such have put in place a framework of controls to ensure that the ongoing financial performance is measured in a timely and correct manner and that risks are identified as early as is practicably possible. There is a comprehensive budgeting system and monthly management accounts are prepared which compare actual results against both the budget and the previous year. They are reviewed and approved by the Board, and revised forecasts are prepared on a regular basis. Relations with shareholders The Company reports to shareholders twice a year. The Company dispatches the notice of its Annual General Meeting, together with a description of the items of special business, at least 21 clear days before the meeting. Each substantially separate issue is the subject of a separate resolution and all shareholders have the opportunity to put questions to the Board at the Annual General Meeting. The Chairman of the Audit and Remuneration Committees normally attend the Annual General Meeting and will answer questions which may be relevant to their work. The Chairman advises the meeting of the details of proxy votes cast on each of the individual resolutions after they have been voted on in the meeting. The Chairman and the non-executive Director intend to maintain a good and continuing understanding of the objectives and views of the shareholders. Corporate Social Responsibility The Board recognises that it has a duty to be a good corporate citizen and is conscious that its business processes minimise harm to the environment, contributes as far as is practicable to the local community and takes a responsible and positive approach to employment practices. Report of the Remuneration Committee Statement of Compliance This report does not constitute a Directors Remuneration Report in accordance with the Directors Remuneration Regulations 2007 which do not apply to the Company as it is not fully listed. Policy on Executive Directors' remuneration Remuneration packages are designed to motivate and retain executive Directors to ensure the continued development of the Company and to reward them for enhancing value to shareholders. The main elements of the remuneration package for executive Directors are basic salary or fees, benefits, and share option incentives. Directors' remuneration The remuneration of the Directors for the year ended 31 December 2007 is shown below: 2007 2006 Executive Directors £'000 £'000 A Hutchinson 138 134 P Foulger 37 30 175 164 Non-Executive Directors A Reynolds 70 40 G Hall 22 15 92 55 Directors' Share Options As at 31 December 2007 the Company had granted the following options to Directors of the Company. Option Number of price per Ordinary Shares Option Holder Ordinary Share under option Exercise period Adam Reynolds 20p 1,250,000 29 June 2006 - 28 June 2010 Gordon Hall 20p 500,000 29 June 2006 - 28 June 2010 The maximum entitlements under the bonus and share incentive scheme to Directors to whom awards have been made are set as follows: Director Maximum Share Entitlement Tony Hutchinson 1,667,168 Paul Foulger 500,150 Directors'Liability Insurance The Company has entered into deeds of indemnity for the benefit of each Director of the Company in respect of liabilities to which they may become liable in their capacity as Director of the Company and of any Company in the Group. Those indemnities are qualifying third party indemnity provisions within the meaning given to that term by Section 309B of the Companies Act, and all those indemnities remain in force. Independent Auditors' Report to the Membersof International Brand Licensingplc We have audited the Group and parent Company financial statements of International Brand Licensing plc for the year ended 31 December 2007, which comprise the Consolidated Income Statement, the Group and Parent Company Balance Sheets, the Group Consolidated Cash Flow Statement, the Group Consolidated Statement of Changes in Equity and the related notes. These financial statements have been prepared under the accounting policies set out therein. This report is made solely to the Company's members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken for no purpose other than to draw to the attention of the Company's members those matters which we are required to include in an auditor's report addressed to them. To the fullest extent permitted by law, we do not accept or assume responsibility to any party other than the Company and Company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Directors and Auditors The Directors' responsibilities for preparing the Annual Report and the financial statements in accordance with applicable law and International Financial Reporting Standards (IFRS) as adopted by the European Union are set out in the Statement of Directors' Responsibilities. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985, and as regards the Group financial statements, Article --> [Author:c] 4 of the IAS regulations. We also report to you whether, in our opinion, the information given in the Directors' report is consistent with those financial statements. The information in the Directors Report also includes the specific information given in the Chairman's statement. In addition we also report to you if, in our opinion, the Group has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding the Directors' remuneration and other transactions is not disclosed. We read the other information contained in the Annual Report, and consider it is consistent with the audited financial statements. This information comprises only the Chairman's Statement, the Corporate Governance Statement, the Report of the Remuneration Committee and the Directors' Report. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. Basis of Audit Opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion: * the financial statements give a true and fair view, in accordance with International Financial Reporting Standards as adopted by the European Union, of the state of the affairs of the Company and Group as at 31 December 2007 and of its profit for the year then ended; * the financial statements have been properly prepared in accordance with the Companies Act 1985 and, as regards the Group financial statements, Article 4 of the IAS Regulation; * the information given in the Directors' Report is consistent with the financial statements. * Gerald Edelman 23 June 2008 Chartered Accountants 25 Harley Street Registered Auditor London W1G 9BR ConsolidatedIncome Statement For the year ended 31 December 2007 Notes 2007 2006 £'000 £'000 Revenue 3 1,857 3,077 Cost of Sales (1,012) (1,503) Gross profit 845 1,574 Administrative expenses (273) (988) Operating profit 4 572 586 Operating profit analysed as: Before exceptional items (519) 647 Exceptional profit on sale of 5 1,152 121 intangible assets Share based payments (61) (182) Operating profit after exceptional 572 586 items Finance Income 7 50 - Finance Costs 7 (7) (4) Profit before tax 615 582 Taxation 8 (150) 14 Profit for the year attributable to 465 596 shareholders Earnings per ordinary share 9 pence pence Basic and diluted 1.4 1.8 Consolidated Statement of Recognised Income and Expenses For the year ended 31 December 2007 2007 2006 £'000 £'000 Exchange differences on translation of foreign 224 (161) operations Prior year adjustments - (62) Fair value adjustment in respect of (43) - available-for-sale financial assets Income and expense recognised directly in 181 (223) equity Profit for the year 465 596 Total recognised income and expenses for the 646 373 year attributable to equity holders of the group Balance Sheets As at 31 December 2007 Group Group Company Company 2007 2006 2007 2006 Assets Notes £'000 £'000 £'000 £'000 Non-current assets Property, plant and 10 6 9 1 1 equipment Intangibles 11 3,365 3,142 - - Deferred tax assets 19 50 38 50 50 Investments 12 - - - - Available-for-sale 13 70 - 70 70 financial assets Total non-current 3,491 3,189 334 252 assets Current Assets Inventories 14 110 593 - - Trade and other 15 527 1,339 479 1,008 receivables Cash and cash 16 1,437 40 1,199 10 equivalents Total current assets 2,074 1,972 1,678 1,018 Total assets 5,565 5,161 2,012 1,270 Liabilities Current liabilities Trade and other 17 (491) (808) (120) (638) payables Current Tax (98) (54) (20) - liabilities Total current (589) (862) (140) (638) liabilities Net Assets 4,976 4,299 1,872 632 Equity Share Capital 20 336 336 336 336 Share Premium 21 3,090 3,090 3,090 3,090 Other reserve 21 244 244 - - Foreign Currency 21 63 (161) - - Reserves Retained Earnings 21 1,243 790 (1,554) (2,794) Total Shareholders' 4,976 4,299 1,872 632 Equity The financial statements were approved and authorised for issue by the Board on 23 June 2008. Paul Foulger Director Group Statement of Changes in Equity Share Share Other Foreign Retained Total capital premium reserve Currency earnings Equity Reserve £'000 £'000 £'000 £'000 £'000 £'000 As at 1 January 2006 333 3,048 244 - 89 3,714 Profit for the year - - - - 596 596 Issue of ordinary shares 3 42 - - - 45 Exchange difference - - - (161) - (161) Equity-settled share based - - - - 105 105 payment At 1 January 2007 336 3,090 244 (161) 790 4,299 Profit for the year - - - - 465 465 Total recognised income - - - - 465 465 and expense Fair value adjustment in - - - - (43) (43) respect of available-for-sale financial assets Equity-settled share based - - - - 31 31 payment Exchange difference - - - 224 - 224 Total income and - - - 224 453 677 expenses recognised directly in equity At 31 December 2007 336 3,090 244 63 1,243 4,976 ConsolidatedCash Flow Statement For the year ended 31 December 2007 2007 2006 £'000 £'000 Operating activities after exceptional items Operating profit 572 586 Depreciation 3 5 Exceptional profit on sale of intangible asset (1,152) (121) Decrease/(increase) in receivables 812 (598) (Decrease) in payables (77) (369) Decrease/(increase) in inventories 483 (341) Share-based payment 61 182 Taxes paid (118) (166) Net cash generated by /(used in) operating 584 (822) activities Investing activities Interest received 50 - Purchase of property, plant and equipment - (4) Purchase of intangible fixed assets - (446) Net proceeds on sale of intangible asset 1,152 775 Purchase of listed Investments (113) - Net cash generated by investing activities 1,089 325 Financing activities Interest paid (7) (4) Net cash used in financing activities (7) (4) Net increase/(decrease) in cash and cash 1,666 (501) equivalents Cash and cash equivalents at beginning of period (229) 272 Cash and cash equivalents at end of period 1,437 (229) Notes to the Financial Statements 1. General Information International Brand Licensing plc is a Company incorporated in the United Kingdom and listed on the AIM market of the London Stock Exchange. The address of the registered office is 14 Kinnerton Place South, London, SW1X 8EH. The Group is engaged in the development and exploitation of a portfolio of sports and lifestyle brands, trademarks, trade names and logos. The Group seeks to exploit the value of its brands by granting licences to third parties authorising the manufacture, marketing and sale of specified licensed products for a fixed term by reference to a particular territory. In the UK the marketing and sale of some licensed products is performed by a Group Company. These financial statements are presented in British Pounds Sterling, the currency of the primary economic environment in which the Group operates. The Group comprises International Brand Licensing plc and its subsidiary Companies as set out in Note 12 of the financial statements. 2. Accounting policies The principal accounting policies adopted in preparation of the Group's financial statements are set out below. The policies have been consistently applied, unless otherwise stated. Basis of preparation The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS and IFRIC Interpretations) issued by the International Accounting Standards Board (IASB) as adopted by the European Union and with those parts of the Companies Acts applicable to Companies preparing their financial statements under IFRS. Practice is continuing to evolve on the application and interpretations of IFRS. Further standards may be issued by the International Accounting Standards (IASB) and standards currently in issue and endorsed by the EU may be subject to interpretations issued by IFRIC. The financial statements have been prepared using the measurement basis specified by IFRS for each type of asset, liability, income and expense. The measurement bases are more fully described in the detailed accounting policies below. This is the first time the Group has prepared its financial statements in accordance with IFRS, having previously been prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP). Details of the transition from UK GAAP to IFRS are given in Note 25. The Group has taken advantage of certain exemptions available under IFRS 1 "First time adoption of International Financial Reporting Standards". The financial statements have been prepared on the basis of the following exemptions: * Business combinations prior to January 2006 have not been restated to comply with IFRS3 Business Combinations. * The Group has elected to deem the cumulative currency translation differences on its net investments in foreign operations to be £nil at 1 January 2006. * The Group has applied IFRS 2 Share-based payments exempt to those equity settled awards that were granted on or before 2 November 2002. The preparation of financial statements, in conformity with general accepted accounting principles under IFRS, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates. The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these consolidated financial statements. As permitted by section 230 of the Companies Act 1985 a separate income statement for one parent Company is not presented. The Company's profit for the year was £1,252,000 (2006: Loss £237,000). Business combination The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date. The Group has elected not to apply IFRS 3 "Business Combinations" retrospectively to business combinations prior to the date of transition. Basis of consolidation The financial statements incorporate the financial statements of the Company and entities controlled by the Company made up to the period ended 31 December 2007. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the financial statements from the date that control commences until the date that control ceases. Where necessary adjustments are made to the results of subsidiaries to bring accounting policies into line with those used by the Group. All intra-Group transactions, balances, income and expenses are eliminated on consolidation. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes. Sales of goods are recognised when goods are delivered and title has passed. Sales of services are recognised when the service has been completed and invoiced to the customer. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost, less estimated residual value of each asset, evenly over its expected useful life at the following rates Fixtures and fittings - 25% Computer Equipment - 33.3% Residual values and useful economic lives are reviewed annually. Property, plant and equipment are assessed for impairment annually or more often if events or changes in circumstances indicate that the carrying value may not be recoverable. Where an impairment review is deemed necessary it is performed in accordance with the policies set out as before. Impairment of assets other than goodwill and intangible assets with an indefinite life At each balance sheet date, the Directors review the carrying amounts of the Group's tangible and intangible assets, other than goodwill and intangible assets with an indefinite life, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amounts of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of the money and the risks specific to the asset which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in the prior period. A reversal of an impairment loss is recognised in the income statement immediately. Available-for-sale financial assets For available-for-sale investments, gains and losses arising from changes in fair value are recognised directly in equity through the statement of recognised income and expense, until the security is disposed at which time the cumulative gain or loss previously recognised in equity is included in the consolidated income statement for the period. If an available-for-sale investment is determined to be impaired, the cumulative loss previously recognised in equity is included in the income statement for the period. Intangible Assets Intangible assets represent acquired trademarks and are recorded at historic cost. No amortisation is charged as they are regarded as having infinite lives. The annual results reflect significant expenditure incurred in the support and development of these brands. In addition the trademarks are supported by the existence of international licensee agreements which establish obligations as to guaranteed minimum licence income and marketing arrangements with a view to maximising long-term growth. The Directors believe that the licensee agreements will be renewed at the end of their legal expiry dates and that the value of the trademarks will be maintained. The carrying values are reviewed annually in accordance with IAS 36 with a view to write down if impairment arises. Inventories Inventories and work in progress are stated at the lower of cost and net realisable value. Cost is calculated on a first in and first out basis and includes attributable overheads, where appropriate. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Where necessary, provision is made for slow moving and obsolete stock. Stocks on consignment and their related obligations are recognised in current assets and creditors respectively. Financial instruments Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. Cash and cash equivalents comprise cash on hand and deposits held on call with banks. Trade and other receivables Trade receivables are measured at fair value. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original term of the receivable. The amount of the provision is the difference between the carrying amount and the recoverable amount and this difference is recognised in the income statement. Trade and other payables Trade payables are initially measured at fair value and subsequently measured at amortised cost using the effective interest rate method. Financial liability and equity Financial instruments issued by the Group are treated as equity (i.e. forming part of shareholders' funds) only to the extent that they meet the following two conditions: * they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and * where the instrument will or may be settled in the Company's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company's own equity instruments or is a derivative that will be settled by the Company's exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments. To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the Company's own shares, the amounts presented in the historical financial information for called up share capital and share premium account exclude amounts in relation to those shares. The finance cost on the financial liability component is correspondingly higher over the life of the instrument. Equity instruments issued by the Company are regarded as the proceeds received, net of direct issue costs. Equity comprises the following: * Share capital represents the nominal value of equity shares. * Share premium represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue. * Other reserve represents the merger reserve arising on accounting for a business in prior years. * Foreign currency reserve represents the differences arising from translation of investments in overseas subsidiaries. * Profit and loss reserve represents retained profits. Foreign currency The individual financial statements of each Group Company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group Company are expressed in pounds sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements. In preparing the financial statements of the individual Companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at rates of exchange prevailing on the dates of the transactions. At the balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the profit and loss account for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such monetary items, any exchange component of the gain or loss is also recognised directly in equity. For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during the period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group's translation reserve. Such translation differences are recognised as income and expense in the period in which the operation is disposed of. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rates. Taxation The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Share based payments The Group has applied the requirements of IFRS 2 Share based payments. IFRS 2 has been applied to all grants of equity instruments after 1 November 2005 that were unvested at 1 January 2006, in accordance with the exemptions of IFRS 1. The Group issues equity and cash settled share-based payments to employees. Equity-settled share payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share based payments is expensed on a straight line basis over the vesting period, based on the Group's estimate of shares that is eventually vest and adjusted for the effect of non market-based vesting conditions. Upon exercise of share options the proceeds received net of attributable transaction costs are credited to share capital, and where appropriate share premium. A liability equal to the portion of the goods and services received is recognised at the current fair value determined at each balance sheet date for cash-settled, share-based payments. National insurance on share options To the extent that the share price at the balance sheet date is greater than the exercise price on options granted under unapproved schemes, provision for any National Insurance Contributions have been based on the prevailing rate of National Insurance. The provision is accrued over the performance period attaching to the award. Accounting Standards issued but not yet effective and/or adopted. Listed below are new or amended Accounting Standards, or new interpretation guidelines that are not yet effective and/or adopted that may have an impact on the Group, together with the year in which they become applicable to our financial statements. * IFRS 3 revised: Business Combinations 2009 Financial Year * IFRS 2 Amended: Share Based Payments 2009 Financial Year * IFRS 8: Operating Segments 2009 Financial Year * IAS 1: Presentation of Financial 2009 Financial Statements Year * IAS 23: Borrowing costs (revised 2007) 2009 Financial Year * IAS 27 Amended: Consolidated and Separate Financial 2009 Financial Statements Year * IAS 32 Amended: Financial Instruments: Presentation 2009 Financial and IAS 1 Presentation of Financial Year Statements - Puttable Financial Instruments and Obligations arising on Liquidation * IFRIC 11 IFRS 2: Group and Treasury share 2008 Financial transaction Year * IFRIC 12: Service concession arrangements 2009 Financial Year * IFRIC 13: Customer Loyalty Programmes 2009 Financial Year * IFRIC 14 IAS 19: The Limit on a Defined Benefit 2008 Financial Asset, Minimum Funding Requirements Year and their interaction Whilst the adoption of these new Accounting Standards and interpretations will undoubtedly lead to additional or modified levels of disclosure and presentation of financial information, we do not anticipate that they will significantly alter the reported earnings of the Group. Significant judgements, key assumptions and estimates In the course of the preparation of the financial statements, the Group has made the following significant estimates: * Estimates of the future cash flows of the Group's subsidiaries which justify the carrying value at which the intangible asset cost is carried, in order to arrive at whether an impairment provision is required. These have been based on each subsidiary's budget for 2008 and appropriate growth rates and discount rates have been used. * Judgements made on the estimates of the useful life of property, plant and equipment, as set out in the relevant accounting policies above. * Estimates have been used to determine the appropriate charge for share-based payments. These have been set out in Note 22. 3. Segmental Reporting Primary segmental Replica Kit Licensing Eliminations Group reporting format Business Based on operating £'000 £'000 £'000 £'000 divisions Year ended 31 December 2007 Total Revenue 1,516 341 - 1,857 Operating Results (76) (109) (185) Unallocated corporate (395) expenses Exceptional profit on sale 1,152 of intangible assets Operating profit 572 Finance income 50 Finance costs (7) Profit before tax 615 Taxation (150) Profit after taxation 465 Balance Sheet Assets Segment assets 1,839 3,923 (1,519) 4,243 Unallocated corporate 1,322 assets Total assets 5,565 Liabilities Segment liabilities 210 2,189 (1,950) 449 Unallocated corporate 140 liabilities Total liabilities 589 Other information Depreciation and 1 2 - 3 amortisation Year ended 31 December 2006 Total Revenue 2,644 433 - 3,077 Operating Results 598 2 - 600 Unallocated corporate (135) expenses Exceptional profit on sale 121 of intangible assets Operating profit 586 Finance costs (4) Profit before tax 582 Taxation 14 Profit after taxation 596 Balance Sheet Assets Segment assets 2,747 3,371 (1,097) 5,021 Unallocated corporate 140 assets Total assets 5,161 Liabilities Segment liabilities 250 2,284 (2,310) 224 Unallocated corporate 638 liabilities Total liabilities 862 Other information Property, plant and 1 3 - 4 equipment additions Intangible fixed asset 446 - 446 additions Depreciation and 1 4 - 5 amortisation Secondary segmental reporting format The turnover and pre tax profit is attributable to the principal activity of the Group. An analysis of turnover by geographical destination is given below. 2007 2006 £'000 £'000 United Kingdom 1,516 2,832 Europe and Scandinavia 79 42 North America 102 147 Australia 10 - Asia 66 - Rest of the World 21 56 Accruals 63 - 1,857 3,077 The net assets of the Group are predominantly in the Swiss subsidiary where the brands are held. The Directors consider that disclosure of the net profit by geographical destination would be prejudicial to the interests of the Group. 4. Operating profit Operating profit has been arrived at after charging: 2007 2006 £'000 £'000 Staff costs (see note 6) 445 444 Depreciation of property, plant and equipment 3 5 Operating lease expenditure: - Land and Buildings 11 23 - motor vehicles 6 5 Auditors' remuneration (see below) - Fees payable to the Company's auditors for the audit of 25 49 the company's annual financial statements and subsidiaries' financial statements Tax compliance services 5 5 5. Exceptional Items 2007 2006 £'000 £'000 Sales of Intangible Assets 1,945 121 Costs associated with sale of intangible asset (793) - 1,152 121 Exceptional items are those significant items which are separately disclosed by virtue of their size or incidence to enable a full understanding of the Group's financial performance. 6. Staff costs Staff costs (including Directors) consist of: 2007 2006 £'000 £'000 Wages and Salaries 396 685 Social Security Costs 42 58 Pension Costs 7 1 445 444 Number Number Distribution and sales 2 2 Administration 6 6 8 8 7. Finance income and costs 2007 2006 £'000 £'000 Finance Income Interest Income from deposits 50 - Finance Costs Interest expense from borrowings at amortised 7 4 cost 8. Taxation 2007 2006 £'000 £'000 Current Tax Expense Current tax charge 86 24 Adjustment in respect of prior periods 76 - Current tax expense 162 24 Deferred tax expense/(income) (12) (38) Total tax expense/(income) 150 (14) The tax assessed for the year differs from the standard rate of corporation tax in the UK at 30%. The differences are explained below: 2007 2006 £'000 £'000 Profit before tax 615 582 Profit on ordinary activities at the standard rate 185 175 of corporation tax in the UK of 30% ( 2006 - 30%) Effects of: Expenses that are not deductable in determining 15 26 taxable profit Indexation Allowance - (54) Adjustment in respect of prior periods 76 - Other tax adjustments (126) (161) Total tax expense/(income) 150 (14) 9. Earnings per share 2007 2006 £'000 £'000 Earnings Earnings for the purposes of basic and diluted 465 596 earnings per share Numbers Weighted average number of ordinary shares for the 33,599,755 33,585,891 purpose of basic earnings per share Dilutive effect of share options - 13,956 Weighted average number of ordinary shares for the 33,599,755 33,599,755 purpose of diluted earnings per share Basic Earnings per 1p ordinary share After exceptional items - basic and diluted 1.4 1.8 There is no dilutive effect of the options 10. Property, plant and equipment Group Plant and Fixtures and Total Machinery Fittings Cost £'000 £'000 £'000 At 1 January 2006 8 39 47 Additions 4 - 4 Exchange Differences - 1 1 At 31 December 2006 12 52 Additions - - - At 31 December 2007 12 40 52 Depreciation At 1 January 2006 6 32 38 Charge for the year 3 2 5 At 31 December 2006 9 34 43 Charge for the year 1 2 3 At 31 December 2007 10 36 46 Net book value At 31 December 2007 2 4 6 At 31 December 2006 3 6 9 Company Plant and Fixtures and Total Machinery Fittings Cost £'000 £'000 £'000 At 1 January 2006 - - - Additions 1 - 1 At 31 December 2006 1 - 1 Additions - - - At 31 December 2007 1 - 1 Depreciation At 1 December 2006 and - - - 31 December 2007 Net book value At 31 December 2007 1 - 1 At 31 December 2006 1 - 1 11. Intangible Fixed Assets Group Intangible Fixed Assets £'000 Cost At 1 January 2006 3,471 Additions 446 Disposals (610) Exchange Differences (165) At 31 December 2006 3,142 Exchange Differences 223 At 31 December 2007 3,365 The Group's trademarks are held by the Swiss Subsidiary whose functional currency is Swiss Francs. Exchange differences arise upon the retranslation of the assets into British Pounds Sterling at the balance sheet date. 12. Investments Investment in subsidiary undertakings £'000 At 1 January 2007 and 31 December 2007 213 The principal subsidiaries of International Brand Licensing plc are as follows Name of Company Proportion Class of Nature of Held Shareholding Business International Brand Licensing 100% Ordinary Intellectual AG* Property Management International Brands Holdings 100% Ordinary Intellectual Limited ** Property Management * Incorporated and registered in Switzerland ** Incorporated and registered in the United Kingdom International Brand Licensing AG holds a 49% stake in Admiral Asia (L) Limited, an associate company incorporated and registered in Malaysia. The effect of the results of Admiral Asia (L) Limited on the group's profits for the year is not material and has therefore not been consolidated into these financial statements. 13. Available-for-sale financial assets Group and Company £'000 At 1 January 2007 - Additions 113 Revaluation through equity (43) At 31 December 2007 70 The fair value of the listed available-for-sale investments is based on reported market prices at the balance sheet date. The Directors do not consider that they have significant influence over the financial and operating policies of the investees as they have no representation on the Board of Directors and have no participation in policy making processes including participation in decisions about the dividends or other distributions and have a small minority stake in those investments. 14. Inventories Group Group Company Company 2007 2006 2007 2006 £'000 £'000 £'000 £'000 Finished goods and goods for 110 593 - - resale Inventories are stated after provision for obsolescence of £292,000 (2006: £ nil).The Directors consider that the carrying value of inventories are stated at the lower of cost held for trading and net realisable value. 15. Trade and other receivables Group Group Company Company 2007 2006 2007 2006 £'000 £'000 £'000 £'000 Trade Debtors - Gross 405 743 - - Less provision for bad (25) - - - Debts 380 743 - - Prepayments and accrued 147 532 2 42 income Amounts due from - - 477 923 subsidiary undertakings after more than one year Other receivable - 64 - 43 527 1,339 479 1,008 The Directors consider that the carrying amount of trade and other receivables approximates to their face value. In addition, some of the unimpaired trade receivables are past due date as at the reporting date. The age of the financial assets past due date but not impaired is as follows: Group Group 2007 2006 £'000 £'000 Not more than 3 months past due date 28 361 More than 3 months but not more than one year 83 28 111 389 The Group has no significant concentration of credit risk, with exposure spread over a large number of customers. These debts have been determined by reference to past default experience and a knowledge of the individual circumstance of certain receivables. 16. Cash and cash equivalents Group Group Company Company 2007 2006 2007 2006 £'000 £'000 £'000 £'000 Cash and cash 1,437 40 1,199 10 equivalents All of the Group's cash and cash equivalents are at floating rate. The Directors consider that the carrying amount of cash and cash equivalents approximates their fair value. 17. Trade and other payables Group Group Company Company 2007 2006 2007 2006 £'000 £'000 £'000 £'000 Bank overdraft - 269 - 269 Trade payables 155 278 26 89 Amounts due to subsidiary - - - 190 undertakings Other taxation and social 18 23 10 9 security Accrued expenses and 315 237 84 81 deferred income Other payables 3 1 - - 491 808 120 638 Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. The Directors consider that the carrying amount of trade and other payables approximates to their fair value. 18. Financial instruments - Risk management The Group in principal does not use or trade in derivative financial instruments. Financial assets categorised as loans Notes Group Group and receivables 2007 2007 £'000 £'000 Trade receivables 15 380 743 Other receivables 15 - 64 Cash and cash equivalents 16 1,437 40 1,817 847 Financial liabilities measured at amortised cost Bank Overdraft 17 - 269 Trade Payables 17 155 278 Other Payables 17 3 1 Accruals and deferred income 17 315 237 Other taxes and social security 17 18 23 Current Tax Liability 17 98 54 589 862 The main risks arising from the Group's financial instruments are credit risk, interest rate risk, liquidity risk and fair value risk. The Board reviews and agrees policies for managing these risks and they are summarised below. These policies have remained unchanged throughout the financial period. Credit risk The Group's exposure to credit risk is limited to the carrying values of financial assets recognised at the balance sheet date, as summarised below: 2007 2006 £'000 £'000 Classes of financial assets - carrying amount Cash and cash equivalents 1,437 40 Trade and other receivables 380 807 1,817 847 The maximum exposure to credit risk in relation to trade receivables is equivalent to the period end balance. It is the Group's policy to assess the credit risk of its customers. The Group closely monitors the credit worthiness of customers and other counterparties, and will require an advance payment if necessary. The Group will terminate business with a company with a poor credit history. The Directors consider that all the above financial assets that are not impaired for each of the reporting dates under review are of good credit quality, based on financial information and past trading history, including those that are past due. The Group is not exposed to any significant credit risk exposure to any single counterparty or Group of counterparties having similar characteristics. The credit risk for cash and cash equivalents is considered negligible since the counterparties are reputable banks with high quality external credit ratings. Liquidity risk The Group's objective is to maintain a balance between continuity of funding and flexibility through cash pooling and shareholder funding. The Group monitors its liquidity risk on an ongoing basis by undertaking rigorous cash flow forecasting procedures. The Group's financial liabilities have contracted maturities, which are summarised below: 2007 2007 2006 2006 Within 6 to 12 Within 6 to 12 6 months months 6 months months £'000 £'000 £'000 £'000 Trade Payables 155 - 278 - Interest rate risk The Group finances itself using its own cash balances which comprise cash and short-term deposits, and therefore has no significant interest rate risk. Additionally, borrowings on short term and long term borrowings are on fixed rates. 19. Deferred taxation Group and Company Group Group 2007 2006 £'000 £'000 Balance as at 31 January 2007 (38) - Deferred tax taken straight to the income statement (12) (38) Deferred tax asset consisting of other timing (50) (38) differences 20. Share capital 2007 2006 £'000 £'000 Authorised 50,000,000 ordinary shares of 1p each 500 500 Allotted, called up and fully paid 33,593,353 ordinary shares of 1p each 336 336 At year end there were 650,000 unexercised share options held by @miral BV at an exercise price of 18.5p. These options are exercisable by 11th January 2011. Additionally as at 31 December 2007 there were 225,000 unexercised options held by a former Director at an exercise price of 18p, exercisable by 30 January 2014. 21. Reserves Group Foreign Share Other Currency Retained premium Reserve Reserve earnings £'000 £'000 £'000 £'000 As at 1 January 2007 3,090 244 (161) 790 Profit for the year - - - 465 Share Based Payment - - - 31 Fair value adjustment in - - - (43) respect of available-for-sale financial assets Exchange difference - - 224 - At 31 December 2007 3,090 244 63 1,243 Company Foreign Share Merger Currency Retained premium Reserve Reserve earnings £'000 £'000 £'000 £'000 As at 1 January 2007 3,090 - - (2,794) Profit for the year - - - 1,252 Share Based Payment - - - 31 Fair value adjustment in - - - (43) respect of available-for-sale financial assets At 31 December 2007 3,090 - - (1,554) 22. Share based payment Share options have been granted as set out in Note 20 and in the Report of the Remuneration Committee on page 12. Options were valued using the Black-Scholes option-pricing model. The fair value per option granted and the assumptions used in the calculations are as follows 2007 2006 Weighted average share price in pence 19 19 Weighted average exercise price in pence 19 19 Expected volatility 20% 20% Expected life in years 8 8 Risk free rate 4.5% 4.5% Dividend yield 0% 0% Expected volatility was determined by calculating the volatility in the share price over the 12 months to 31 December 07. 23. Leases Operating leases The total annual future minimum lease payments due are as follows: Group Group 2007 2006 £'000 £'000 Land and Buildings Not later than one year 11 14 Later than one year and not later than five - 9 years 11 23 Motor Vehicles Not later than one year 6 - Later than one year and not later than five - 5 years 6 5 24. Related Party Disclosures During the year the Company was invoiced £15,000 by Hansard Communications.com Limited, a Company of which both Adam Reynolds and Paul Foulger are Directors, for financial public relations services. The Company was also invoiced £12,000 by Alan Bailey (Studios) Limited, a Company of which both Adam Reynolds and Paul Foulger are Directors, for office rent and administration costs. 25. Explanation of transition to IFRS As stated in the basis of preparation, these are the Group's first annual consolidated financial statements prepared in accordance with IFRS. The last financial statements under UK GAAP were for the year ended 31 December 2006 and the date of transition to IFRS was therefore 1 January 2006. The adoption of IFRS has had no impact on either the equity or results of the Company for 2007. The only changes resulting from the transition to IFRS are of a presentational nature. 26. Capital Commitment The Group has no capital commitments as at 31 December 2007. 27. Contingent Liabilities There are no material contingent liabilities as at 31 December 2007.

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