Preliminary Results
23 January 2003
ONLINE TRAVEL CORPORATION PLC (OTC)
PRELIMINARY RESULTS FOR THE YEAR TO 31 OCTOBER 2002
Online Travel Corporation today announces its preliminary results for the year
ended 31 October 2002, a year in which we achieved both positive EBITDA for the
year (pre exceptionals), and positive operating cashflow for the second half.
HIGHLIGHTS
Positive EBITDA before exceptional items
- Pre Web development costs £2.0m
- Post Web development costs £0.4m
Positive cash flow from operations in second half of 2002
48% increase in gross sales for the year to £85.5 million (2001: £57.7
million)
79% increase in leisure travel sales to £51.1 million (2001: £28.6
million)
Launch of onlinetravel.com as our flagship brand
Successful integration of EMAP and IfYouTravel and the continuing
integration of the All-hotels and Travelstore acquisitions
Post year end roll out of enhanced Order Processing System (OPS) across
the group which will deliver improved cost efficiencies and higher
customer conversion rates
First sales of technology licences post year end for business (Envoy) and
leisure (Travel Junction)
Chief executive of Online Travel Corporation plc, Mark Jones said:
'In a challenging period for the travel sector we are pleased to have achieved
such strong growth, particularly in our leisure division, where a 79% increase
in sales is attributable to the expansion of our product range, including our
pioneering Build-Your-Own holiday technology, and the increase in the number of
major clients we secured during the year. Growth in gross travel sales since
the year-end of over 70% and revenues from technology licensing is encouraging.
These put us in a good position to harvest some benefits from the predicted
growth in the online travel sector.'
For further information, please contact:
Online Travel Corporation plc:
Mark Jones, Managing Director Tel + 44 (0) 20 8607 9281
Mark Simpkins, Finance Director Tel + 44 (0) 20 8401 8005
Altium Capital Limited: Tel +44 (0) 20 7484 4040
Garry Levin
Tim Richardson
Cardew Chancery: Tel + 44 (0) 20 7930 0777
Richard Fallowfield
Jackie Range
Chairman's Statement
The Directors of Online Travel Corporation Plc ('OTC' or the 'Group') are
pleased to present the trading results for the year ended 31 October 2002.
In 2002 we reached an important milestone: we are pleased to report positive
earnings before interest, tax, depreciation and amortisation (EBITDA) of £2.0
million before web development costs of £1.6 million, and exceptional items of
£1.0m.
Despite the serious dislocation caused by the events of 11 September 2001, the
overall increase in gross sales value to £85.5 million represents growth of 48%
on last year. This growth is driven by an increase of 79% in sales in our
leisure travel and new media division to £51.1 million, due, in part, to growth
in sales via our Build-Your-Own holiday technology.
We have expanded our own brands with the successful launch of our new umbrella
brand, onlinetravel.com, and have increased the number of clients that
recognise the benefit of our services. New clients in the media industry
include the The Times, The Telegraph, The Guardian, Mirror Group and Associated
New Media, and peers in the e-travel industry include Priceline, Cheapflights
and Zuji. We have also enhanced our relationships with major portals including
BT, Freeserve, Virgin, and Tiscali.
During the year we continued to build on the fundamentals of our long-term
strategy increasing distribution channels, adding to the content of our sites,
and creating operating efficiencies. We enhanced our organic growth with the
acquisition of all-hotels.com and travelstore.com in the second half of the
year, which have added new products, technology and customers. We continue to
derive benefits from the integration of these businesses. OTC now provides the
most comprehensive range of e-travel products and services in Europe and
Asia-Pacific.
We are increasingly excited by the opportunities afforded to the business
through licensing our technology, both on the business and leisure front. We
were pleased to be able to announce sales in both these areas since the year
end.
The introduction of the most advanced dynamic packaging technology, allowing
our customers to Build-Your-Own holidays; the newly released state of the art
Order Processing System that follows each transaction to completion, accounting
and after sale service and our Licensing Services and Support Unit, offering
third parties the use of our technology; will all produce operational and
revenue efficiencies and assist OTC in becoming a sustainable and profitable
Travel and Transactional Services Provider.
Alan Judd did not seek re-election at the AGM on 20th March 2002 and
accordingly ceased to be a director of the Company. We would like to thank
Alan, who as a founder and former Chairman had made a large contribution to
building OTC.
Kyril Saxe-Coburg, a Non-Executive Director, resigned from the Board on 20th
March 2002. Kyril had contributed to the development of OTC over the past
eighteen months for which we are grateful and we thank him for his counsel.
On 29th October 2002, Mark Simpkins was appointed to the Board as Finance
Director. On the same day Robert Faulkner resigned from the Company and the
Board would like to thank Robert for his contribution to OTC during his time
with the Company.
Whilst we do not underestimate the challenges of a growing business, the
opportunities exist for our dedicated and enthusiastic management and employees
to further build upon the efficiencies and opportunities created in the past
year.
Tommaso Zanzotto 23 January 2003
Chairman
Financial Review
Total transactional value for the Group during the year to 31 October 2001,
including acquisitions and associates, rose 48% to £85.5 million (2001: £57.7
million).
Statutory turnover increased to £70.2 million (2001: £46.1million) and
statutory gross profit increased to £9.85 million (2001: £7.39 million). The
gross margin percentage on statutory turnover decreased to 14% (2001: 16%) due
both to a decrease in high margin incremental sales and a change to the
charging mechanisms from the airline industry to fees and net invoicing rather
than commissions.
The number of annual transactions increased to 452,000 an increase of 76% on
the previous year (2001:259,000) although the average value per transaction
declined to reflect the reduction in the average travel value per transaction
predominantly due to the introduction of lower cost flights from the major
operators across both the business and leisure sector.
The net loss after a taxation credit for Research and Development of 0.47
million is £2.56 million (2001: £2.57 million).
The following table has been included for prior year comparison purposes,
showing pro forma Total Transaction Value (including associates and
acquisitions for the full year) and actual Total Transaction Value (including
associates and acquisitions from purchase date).
Ye 31 Oct 2002 YE 31 Oct 2001
£000's £000's
Pro forma TTV (including
associates and a full year of
acquisitions)
TTV 105,400 69,700
Gross Margin 14,100 9,700
Actual TTV (including associates)
TTV 85,503 57,755
Gross Margin 11,419 8,400
Gross Margin % 13.4% 14.5%
Operating Costs 9,381 8,094
______ _______
EBITDA pre web and exceptional costs 2,038 306
Web Costs 1,649 1,580
EBITDA pre exceptional costs 389 (1,274)
______ _______
Exceptional cost 1,033
Depreciation and amortisation 1,747 860
Interest 641 434
______ _______
Profit Before Taxation (3,033) (2,568)
______ _______
Taxation 473
______ ______
Profit after Taxation (2,560) (2,568)
Operating expenses
Call centre support and customer relationship management costs increased to £
4.2 million (2001: £3.6 million) as part of the drive to improve service levels
and conversion rates. The development of dedicated call centres need to be made
in advance of anticipated growth. The introduction of enhanced technology,
especially in the flight booking engine, and continued benefits of scale, along
with increased use of the internet to book, will result in lower costs as a
percentage of sales in the financial year 2003.
Sales and marketing costs of £1.8 million (2001: £1.3 million), reflects an
absolute increase in marketing spend following the acquisition in the previous
year of the EMAP and If You Travel brands.
General administration and overhead costs increased to £3.4 million (2001: £3.1
million) reflecting the costs of expanding the senior management team and
supporting infrastructure to meet increased volumes. The increase includes the
cost of integrating acquisitions and the implementation of back-office
efficiencies. We expect further operational efficiencies from the introduction
of new technology solutions to our business processes.
Web development and content costs of £1.65 million (2001: £1.58 million)
reflect the continued improvements in the range and integration of travel
products and content on our own and client sites. There is a further charge of
£1.74 million (2001: £0.89 million) in depreciation and amortisation charges
from the incorporation of our acquisitions and the development of propriety
systems' technology.
During the period the company was subjected to significant exceptional costs,
totalling £1.03 million. These include the legal fees associated with aborted
acquisitions, the restructuring of the senior management team and, as part of
the integration of acquisitions made during 2001 and 2002, the reorganisation
of staff. There is also a one off charge of £0.20 million that relates to the
development and implementation of our new front-end reservations system and
provisions against balance sheet items of £0.2 million.
Cost reductions
Our operating cost base pre exceptional items increased by 17% to £9.4 million
(2001: £8.0 million), against an increase in gross sales of 48%. The
proportional reduction in costs is derived from the combined impact of our cost
reduction programme and a higher percentage of online bookings being transacted
without call centre sales support.
We expect to generate further proportional savings through economies of scale,
the roll out of our new Order Processing System across all leisure divisions,
.the continuing integration of Travelstore.com and all-hotels.com and by
driving a higher proportion of transactions online.
Cash balance
Our cash balance at 31 October 2002 was £4.2 million (2002: £2.1 million).
During the second half of the year the Group was cashflow positive, however,
for the year as a whole there was an outflow from operations of £0.6 million.
Mark Simpkins 23 January 2003
Finance Director
Operational review
The Group has made significant strides towards its objective of becoming a
major technology based travel business. We already, in our opinion, provide the
most diverse and comprehensive range of e-travel products in Europe.
Despite a challenging time for the travel industry in 2002, we are pleased to
report an overall growth in sales of 49% to £85.5 million. Operating costs
(before exceptional items) increased by 17%, enabling OTC to achieve the
significant milestone of positive earnings before interest, tax, depreciation
and amortisation (EBITDA) of £0.2 million (before exceptional costs).
Associates contributed an additional £0.2 million in profits.
We continue to charge the majority of web development costs as they are
incurred so the improvement to positive EBITDA (pre web development costs) of £
2.0 million demonstrates the progress we have made.
We are also pleased to report positive cashflow from operations in the second
half of the year. Having raised £3.6 million in net funds from shareholders
during the year, cash balances at 31 October 2002 were £4.2 million (2001 £2.1
million.)
The increase in sales in our leisure division is attributable to the expansion
of our product range, particularly our pioneering Build-Your-Own holiday
technology, and the increase in the number of major clients we secured during
the year. We will continue to increase the bredth and quality of our products
and this should enable the Group to increase revenues from existing clients,
and to attract both new clients and new customers.
In the two months since the year-end, gross sales have increased by over 70% on
the same period during 2002. We expect proportional future cost savings from
the continuing integration of the acquisitions of all-hotels and Travelstore
and further efficiencies from rolling out our new Order Processing System (OPS)
across all divisions.
The increase in sales at reduced proportional costs is encouraging and coupled
with the anticipated growth in the online travel sector and incremental
revenues from technology licensing, we are in a good position to harvest some
benefit from our investment.
Sales review
We now operate over 100 travel sites for a wide range of portals, media groups,
retailers and other travel businesses. During the year we renewed contracts
with our largest clients including Freeserve, Tiscali, BT, Virgin.net and The
Telegraph, new clients include Associated New Media, The Guardian, The Times,
The Mirror, Nationwide, Priceline, Cheaflights, plus many new overseas clients
including Ireland Online, ESAT Digital, Zuji, AOL and AltaVista.
Our client list demonstrates the quality and unique nature of our offering, I
would highlight our contract with ZUJI, the largest online travel company in
Asia-Pacific and a joint venture of 16 leading Asia-Pacific airlines and
Travelocity.com, as a demonstration of our ability to extend our offering to
the International market.
Increased brand awareness
Our model enables large portals, media groups and retailers to provide e-travel
services tailored to the needs of their customers. The recent launch of
onlinetravel.com provides us with greater visibility on client sites and acts
as our flagship brand. As the number of major media and retail clients grows,
so does the awareness and value of our onlinetravel.com brand.
Other own brands include all-hotels.com, bargainholidays.com, a2btravel.com,
ferrybooker.com, specialist sites such as 1ski.com;ifyouski.com, ifyougolf.com
ifyoudive.com and various activity, youth and explore sites and travelstore.com
for the business traveller. These brands have direct customers, but also
continue to be integrated into our client sites on a white label basis, adding
to the quality of the content and products on offer.
Transaction mix
During the year overall transactions increased 79% to 452,000 (2001: 253,000)(*
76% including a full year of acquisitions to 549,000 (2001 312,000), however,
we experienced a reduction in the average value per passenger due to price
reductions by core travel suppliers, particularly in the business travel
sector.
The launch of new sites and the growth of our own brand sites increased annual
visitors 18.2 million (2001: 6.8 million). The number of transactions initiated
online increased to 71% of total transactions.
We continue to offer our customers the choice of booking online or via our call
centers, but our focus is on driving more business online to achieve the
anticipated cost efficiencies of electronic booking. It is encouraging that
annual transactions without call centre sales assistance increased to over 40%,
verses 14% in 2001. This demonstrates increased consumer confidence in online
booking and an improvement in the range and quality of our online products.
A large part of this increase is due to the number of transactions via our
Build-Your-Own holiday system, which increased to over 25% of leisure sales in
the last quarter of 2002.
As we make it easier for more travel products to be transacted online, we
expect to reap the benefits of improved conversion rates of users to
transacting customers, reduced call centre costs and other administrative cost
savings derived from purely electronic processing.
Technology licensing revenues
In October 2002 we launched Envoy, an Internet based business travel management
system that enables large corporate groups or travel agencies to manage their
business travel requirements. Envoy evolved from the technology acquired with
travelstore.com in June 2002, although the bulk of the Envoy development costs
were incurred prior to acquisition. We, therefore, expect to benefit from
future technology licensing revenues without having directly incurred the core
development costs. The marketing agreement with Worldspan Services Ltd to help
promote the Envoy product, announced in December 2002, will help us secure
licensing customers.
We are also offering leisure clients licences for Travel Junction, a technology
product consisting of selected components of our leisure booking systems. Real
opportunities exist in the travel market for licensing selected technology and
the quality of our products for both the business and the leisure travel
sectors places us in a strong position to capitalise through direct and
third-party licensing agreements.
Technology and product development
Our investment in technology is geared to developing scaleable systems that
encourage online sales at the front end and, by automating procedures, reducing
costs at the back end. We remain focused on deploying our technology resources
to realise the following objectives:
Enhance the range and quality of our products
Improve the functionality of our core booking engines
Improve customer interface for an improved booking experience.
Provide our clients with the advantages of unique products and
personalisation
Integrate sales and administration functions
Strengthen our supporting infrastructure
We continue to build the most diverse and comprehensive range of online travel
products in Europe to attract more clients and customers and convert a higher
percentage of users to transacting customers. Two developments are worth
specific reference:
`Build-your-Own' (BYO)- Perhaps the most significant development in the online
travel sector in 2002 was recognition of the benefits of dymanic packaging. We
were the first business in Europe to launch BYO, our proprietary system on
schedule flights, hotels and villas that allows customers the flexibility to
package component parts dynamically and build their own itinerary. BYO has
achieved widespread acclaim since its first launch in Autumn of 2001 we have
enhanced the range of products available and improved navigation and response
times to make booking easier.
Improved Order Processing System (OPS) - Our proprietary automated OPS launched
in January 2002, and has been enhanced to include all administration aspects of
travel transactions and, since November 2002, has been extended across all
leisure divisions. We expect OPS to give improved service to customers and lead
to more technology driven savings from administration and management reporting
efficiencies.
Travel Division
Leisure and new media
Our leisure and new media divisions experienced the highest rates of growth,
increasing gross sales 79 % to £51.1 million, (2001: £28.6 million).
A large element of the growth is due to the new flights and BYO holiday sales.
We continue to integrate the technology from our specialist sites, including
bargainholidays.com (charter packages) and our specialist ferry, ski, golf,
dive and activity sites, plus recently acquired hotel products from
all-hotels.com into the sites we operate.
Corporate travel
Our corporate division achieved a 26% growth in gross sales to £24.1 million,
(2001: £19.2 million).
Events of September 11, 2001, combined with a general economic slow down in USA
and the Far East put considerable pressure on business travel budgets and had a
significant impact of the corporate travel sector. In light of this, we are
very pleased with the performance of our corporate business.
We continue to streamline costs, and have relocated two central London sites to
the Travelstore.com offices and call centre at Amersham.
Trade concessions
Sales to travel industry employees increased 4% to £10.3 million (2001: £9.9
million). The impact of redundancies in the European travel sector adversely
affected sales in the first half of the year, but new services launched for
airline staff, Airperx, and employee groups such as Travelex resulted in modest
recovery in the second half of the year.
We have increased the number of members of our various trade clubs to over
140,000, including our joint venture with Concorde International Travel in Asia
Pacific. This also demonstrates the global reach of online travel concessions
market.
Outlook
In what was perhaps the most challenging year in history for the travel
industry, the online travel sector continued to grow. OTC continued to
outperform the sector, testimony to the range of products and technology we
have built and the commitment and efforts of our staff.
Independent research still predicts considerable growth in the online travel
sector over the next five years. Of particular interest is predicted growth in
dynamic packaging, the online hotel market, vacation property rental and
specialist activities. OTC is well positioned to benefit from this growth.
We expect an increasing proportion of our gross sales to be booked online
without sales assistance, and an increasing number to utilise our
Build-Your-Own holiday system. We expect this to result in gross margin
improvements.
In the two months since the year-end, gross sales have increased by over 70% on
the same period in the previous year, with transactions via our BYO system
increasing to over 25% of leisure travel sales.
The continued growth in gross sales at reduced proportional costs is
encouraging and is expected to continue in 2003. This growth in sales revenues
coupled with revenues from technology licensing is encouraging and put us in a
good position to harvest some benefits from the predicted growth in the online
travel sector. We look forward to keeping shareholders informed of our
progress.
Mark Jones
Chief Executive Officer
Online Travel Corporation Plc
Consolidated profit and loss account for the year ended 31 October 2002
£000's Year Ended Year Ended
31 Oct 2002 31 Oct
2001
Pre-Exceptional Exceptional Total Total
items items
Total Transaction 85,503 - 85,503 57,755
Value1
- Continuing 64,435 - 64,435 46,075
- Acquisitions 5,804 - 5,804 -
Group Turnover 70,239 70,239 46,075
Cost of sales (60,173) (213) (60,386) (38,687)
_______ _____ _______ _______
Gross profit 10,066 (213) 9,853 7,388
_______ _____ _______ _______
Operating Costs
Selling and (6,355) (16) (6,371) (5,128)
distribution costs
Administration costs (3,513) (804) (4,317) (3,491)
Operating costs (9,868) (820) (10,688) (8,619)
before depreciation
and goodwill
amortisation
EBITDA 198 (1,033) (835) (1,231)
Depreciation (1,418) - (1,418) (682)
Goodwill (326) - (326) (178)
amortisation
Total Operating (11,612) (820) (12,432) (9,479)
Costs
Operating (loss)/
profit
- Continuing (1410) (988) (2,398) (2,091)
- Acquisitions (136) (45) (181) -
GROUP OPERATING LOSS (1,546) (1,033) (2,579) (2,091)
Share of associate company profit/(losses) 187 (43)
GROUP LOSS ON ORDINARY ACTIVITIES BEFORE INTEREST (2,392) (2,134)
AND TAXATION
______ ______
Interest receivable 25 63
Interest payable and similar (666) (497)
charges
______ ______
GROUP LOSS ON ORDINARY ACTIVITIES BEFORE (3,033) (2,568)
TAXATION
Taxation 473 -
______ ______
RETAINED LOSS FOR THE FINANCIAL YEAR (2,560) (2,568)
______ ______
LOSS PER SHARE Pence Pence
- Basic (2.6) (3.5)
______ ______
- Fully diluted (2.6) (3.5)
______ ______
1Total transaction value does not represent the group's statutory turnover and
comprises amounts relating to the Group and its share of associates
Online Travel Corporation Plc
Consolidated balance sheet at 31 October 2002
£000's Year ended Year Ended
31 Oct 2002 31 Oct 2001
FIXED ASSETS
Intangible assets
- Goodwill on consolidation 5,911 2,072
- Purchased goodwill 3,016 3,175
Tangible assets 2,203 1,776
Investment in associated companies 239 147
_______ _______
Total Fixed Assets 11,369 7,170
_______ _______
CURRENT ASSETS
Debtors 5,800 4,077
Cash at bank and in hand 4,174 2,156
9,974 6,233
CREDITORS: amounts falling due within one (9,074) (5,901)
year
NET CURRENT ASSETS 900 332
_______ _______
TOTAL ASSETS LESS CURRENT LIABILITIES 12,269 7,502
CREDITORS: amounts falling due after one (880) (500)
year
_______ _______
NET ASSETS 11,389 7,002
_______ _______
CAPITAL AND RESERVES
Called up share capital 1,142 810
Share premium account 15,973 9,749
Capital reserve 1,499 1,499
Shares to be issued 391 -
Profit and loss account - deficit (7,616) (5,056)
_______ _______
TOTAL EQUITY SHAREHOLDERS' FUNDS 11,389 7,002
_______ _______
Online Travel Corporation Plc
Consolidated cashflow
£,000 Year Ended Year Ended
31stOctober 31st October 2001
2002
NET CASH INFLOW/(OUTFLOW) FROM OPERATING
ACTIVITIES
- Continuing - pre-exceptional items 457 465
- Continuing - exceptional items (1,033) -
- Acquiring (37) 98
_______ _______
(613) 563
DIVIDENDS FROM JOINT VENTURES AND
ASSOCIATES
Income from associated undertakings 95 -
RETURNS ON INVESTMENTS AND SERVICING OF
FINANCE
Interest received 25 63
Interest and similar charges paid (666) (497)
_______ _______
NET CASH OUTFLOW FROM RETURNS ON (546) (434)
INVESTMENTS AND SERVICING OF FINANCE AND
DIVIDENDS FROM ASSOCIATES
_______ _______
(1,159) 129
TAXATION
Corporation tax paid - -
CAPITAL EXPENDITURE
Payments to acquire tangible assets (1,569) (1,245)
NET CASH OUTFLOW FROM INVESTING ACTIVITIES (1,569) (1,245)
_______ _______
(2,728) (1,116)
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings (333) (164)
Net cash acquired with subsidiary 827 173
undertakings
Purchase of associated undertakings - (155)
Purchase of businesses - (320)
494 (466)
NET CASH OUTFLOW BEFORE FINANCING (2,234) (1,582)
FINANCING
Issue of ordinary share capital 3,788 402
Loans to associated undertakings (37) -
New borrowings 500 -
net cash inflow from financing 4,251 402
_______ _______
INCREASE/(DECREASE) IN CASH
- Continuing 2,374 (1,332)
- Acquisitions (357) 152
_______ _______
2,017 (1,180)
_______ _______
Online Travel Corporation Plc
Notes to the accounts for the year ended 31 October 2002
1. Basis of Preparation
The results incorporated in the preliminary announcement have been prepared
on the basis of accounting policies consistent with previous years.
The preliminary announcement was approved by the Board of Directors on 21
January 2003. The figures for the year ended 31 October 2002 do not
constitute full accounts within the meaning of Section 240 of the Companies
Act 1985.
The figures for the year ended 31 October 2001 have been extracted from the
accounts for 2001, which have been delivered to the Registrar of Companies.
The auditors have reported on those accounts, their reports were
unqualified and did not contain statements under section 237 (2) of (3) of
the Companies Act 1985.
The Annual Report and Accounts for the year ended 31 October 2002 will be
sent to shareholders in March 2003.
2. LOSS PER SHARE 2002 2001
(000's) (000's)
Attributable profit/(loss) (£) (2,560) (2,568)
Average number of ordinary shares in issue 93,671 73,367
Basic loss per share (2.6)p (3.5)p
Fully diluted loss per share (2.6)p (3.5)p
The fully diluted loss per share takes account of outstanding share options
and warrants. The calculation shows that the fully diluted loss per share
is lower than the undiluted loss and in accordance with the requirements of
FRS 14 this is not considered to be dilutive.
3. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Group
£'000
Opening shareholders' funds 7,002
New share capital subscribed 332
Share premium 6,224
Shares to be issued 391
Loss for the financial period (2,560)
Closing shareholders' funds 11,389
4. RECONCILIATION OF OPERATING LOSS TO NET CASH
OUTFLOW FROM OPERATING ACTIVITIES
2002 2001
£'000 £'000
Operating loss (2,579) (2,091)
Depreciation of tangible fixed assets 1,418 682
Amortisation of goodwill 326 183
Increase/(decrease) in debtors 133 (144)
Increase in creditors 89 1,933
NET CASH INFLOW/(OUTFLOW) FROM OPERATING (613) 563
ACTIVITIES
5. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN £'000
NET CASH
Increase in cash in the period 2,017
Net cash at 31 October 2001 2,156
______
Net cash at 31 October 2002 4,174
______
6. Taxation
No value is attributed to tax losses except where their recovery is
reasonably certain.
In the case of Research and Development tax credits, recovery is assessed
as being reasonably certain when each of the following conditions has been
met:
- the relevant expenditure has been incurred at the balance sheet
date
- the relevant claim has been submitted
- the election to surrender the Research and Development losses in
return for early payment has been made
- there is no reason to believe that the claim would be subject to
challenge by the Inland Revenue
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