Final Results

RNS Number : 6837X

Lo-Q PLC

20 February 2012

 



20 February 2012



Lo-Q plc

("Lo-Q" or the "Company")

AUDITED RESULTS ANNOUNCEMENT

For the twelve months ended 31 October 2011

Lo-Q plc (AIM: LOQ), the AIM listed provider of virtual queuing systems for theme parks, water parks and major attractions, announces  results for the twelve months ended 31 October 2011.

The results demonstrate operational, financial and strategic progress during the past year, performing ahead of market expectations, with strong year-on-year growth delivered in revenue, profit before tax and net cash, as well as the delivery of significant new contract wins for both current and new product lines.

Financial Highlights

		Year ended 31 October 2011		Year ended 31 October 2010		Percentage change
		£m		£m		%
Revenue		24.5		20.3		20.1
Profit before tax		2.7		2.3		17.4
Net cash		7.5		6.0		25.0

Operational Highlights

·      Four additional parks contracted and implemented during the period

·      17 percent like for like, year on year increase in average customer spend on Lo-Q products

·      Nine percent increase in park attendees utilising Lo-Q systems

·      Focused development and deployment of new products into adjacent markets, with successful trial of Lo-Q's Q-band water park product completed

·      Strengthening of Board with appointment of John Weston as Non-Executive Chairman

·      FTSE reclassification to Software sector

·      Proud recipient of 2011 Queen's Award for International Trade

Post-Period End Highlights

·      Six-year contract extension with Six Flags for the Company's Q-bot solution

·      Strong early sales success for Q-band water park product

o  Six Flags commits to 2012 Q-band roll-out across nine water parks for a six year term

o  Q-band contract win also secured at Splish Splash in Long Island, New York

·      12 week pilot agreed for smartphone based solution with one of London's best known 'single-line' attractions

·      Global agreement with MasterCard to develop new contactless payment solution

·      Contract win for Q-bot at LEGOLAND Deutschland

Commenting on the results Tom Burnet, Chief Executive of Lo-Q, said:

"2011 was an excellent year for Lo-Q. We delivered significant progress from existing installations; announced long term contracted commitments in relation to existing and new products and established important beachheads in new markets.  In short, we have achieved every single objective we set for ourselves at the start of the year. The strategic initiatives implemented will provide the framework for longer term progress and the hard work and determination of the team, together with the continued development of innovative new products, has created a strong platform on which to build in 2012.

Notwithstanding the challenges of opening 11 new operations around the world, I am confident that we have initiated the momentum that will define our future business."

Enquiries:

Lo-Q plc Tom Burnet, Chief Executive Officer John Alder, Chief Financial Officer	[phone]
FTI Consulting James Melville-Ross, Matt Dixon, Clare Thomas	[phone]
Canaccord Genuity Limited             Simon Bridges, Kit Stephenson	[phone]

These preliminary results are available on Lo-Q's website at www.lo-q.com

About Lo-Q

Lo-Q is the creator of virtual queuing systems for theme parks, water parks and other leisure attractions that allows users to queue without waiting in line.  Lo-Q users reserve their place in a queue electronically and are notified when their turn is up, spending less time queuing and more time enjoying their day out.  

Lo-Q's system has been adopted by leading theme park and attraction operators globally, with customers including Parques Reunidos, Six Flags, Herschend Group and Merlin Entertainments.  These operators benefit not only from happier customers but also from additional revenue streams as time previously spent queuing is instead transformed in to higher spending in park restaurants, gift shops and other retail facilities.  By the end of 2011, more than seven million individuals had used a Lo-Q product and that number is growing.

The Company's technology is protected by extensive patents or patents pending in Europe, USA, Hong Kong and Japan.  The target market for this technology is large and growing, with Lo-Q currently exploring opportunities for expansion into new theme parks and new geographies as well as opportunities to develop new product for other complementary adjacent markets.

Lo-Q is listed on the Alternative Investment Market ("AIM") under the ticker "LOQ".  For further information please visit www.lo-q.com

Chairman's Statement

Today's results demonstrate nothing short of an excellent year for Lo-Q in 2011. Despite the continuing challenge of global economic conditions, with theme park attendances being slightly lower than in 2010, Lo-Q's revenues, profits and cash have each exceeded both our own and the market's expectations.

Operationally and strategically the year has seen many positive and exciting initiatives take shape, each of which will play an important role in Lo-Q's future growth.

Our product development and operational teams have demonstrated the technical and commercial opportunity for Q-band, our water park product. Following a successful trial at Six Flags White Water in the United States we are delighted to have signed contracts for the installation of our Q-band product at ten water parks in time for the 2012 season.  This is a significant achievement, coming so soon after the initial launch of this solution in June. I also remain confident that our continued investment in the development of smartphone solutions will undoubtedly widen our market opportunity globally.

We were proud and delighted that our international expansion has been recognised in the shape of a Queen's Award for International Trade. Achievements of this kind result from the considerable efforts of our global Lo-Q team, each of whom has worked hard to make 2011 a record year.  Their energy, enthusiasm and innovative spirit is a real asset to Lo-Q and on behalf of the entire Board of Directors, I thank them for their efforts.

With new parks to install and operate, those efforts will need to be maintained in 2012.  The year ahead will be one of yet more opportunity for Lo-Q as we start to see the benefits of the initiatives put in place in late 2011.  The installation of Lo-Q technology in our recently contracted new parks will undoubtedly test our service organisation, but progress is already well underway.  Given the strength of our team, our product line-up and a very healthy sales pipeline, I am confident that we can continue to generate premium growth and will continue improving guest experiences at more theme and water parks around the world.

John Weston

Non-Executive Chairman

Chief Executive's Statement

Delivering on our objectives

Having joined the Company in October 2010, this represents my first full year as Chief Executive of Lo-Q.  Early on in my tenure, I set our team a number of objectives: to energise sales efforts, to launch new products, to improve our governance and strengthen our team and to make in-roads into complementary markets adjacent to our theme park core.  Each one of these objectives, I felt, was important if we were to fully capitalise on the exciting opportunities our technology opens up.  I am delighted to report that we have delivered on each objective and additionally achieved a strong financial performance.

Despite the tough underlying economic conditions we were able to deliver a 17 percent increase in profit before tax, rising to £2.7m (2010: £2.3m).  This strong profit performance was supported by revenue growth of 20 percent, rising to £24.5m (2010: £20.3m).  Additionally, we have been able to end the year with a strong net cash position of £7.5m, up 25% from the 2010 figure of £6.0m whilst maintaining our investment in research and development and expansion of the business.

Underpinning these excellent figures has been the continued consumer usage of our solutions.  This year we recorded a 17 percent year-on-year increase in average park guest spend on our products.  With the benefit of additional deployments of our Q-bot product, over 1.2m guests used a Lo-Q product in 2011, a nine percent increase, which against the backdrop of a three percent decline in like-for-like park attendances, we are particularly proud of.

Transforming our operations and reach

This year has seen the benefit of our investment in sales and marketing talent and discipline.  The Company already maintains strong relationships with the theme park operators, with which it partners, helping them to improve and enhance the visitor experience for their guests. During the year, these relationships have been extended or strengthened by new park installations and by the successful extension of our contractual relationship with Dollywood for a further three years.

This momentum has continued, post period-end.  Perhaps the strongest signal so far of this momentum came in November, when our agreement to supply our Q-bot solution to Six Flags, our largest customer, was extended to the end of 2017.

During the year we have invested in building a robust sales pipeline which reflects the strength of our core product set and post period end we have been able to announce a further Q-bot win at LEGOLAND Deutschland.

The pattern of contract wins is a reflection of the trading year of our customers.  Typically, they and we direct our focus in the summer season delivering excellent guest experiences in the parks, and expect to sign new business in the closed season.  We are conscious that this seasonality limits the nature and timing of our market updates during the operating season but we will continue to communicate trading performance appropriately.

In December, we took an important step toward enhancing our offering and signed a global partnership with MasterCard.  Under the terms of this partnership, Lo-Q will work with MasterCard to develop a new contactless payment solution that combines MasterCard's Tap & Go™ PayPass™ payments technology with Lo-Q's innovative queuing software and systems.   This represents an exciting, long-term opportunity for us to further enhance the value of our solutions and we are proud to be associated with such a large, blue-chip global brand.

Targeting new opportunities

Operationally, the Company has continued to develop new and innovative products and solutions, using them to make important first steps in to adjacent target markets where Lo-Q technology has the potential to enhance both visitor experience and operator returns.

The most notable example of this is our Q-band product, launched during the year and designed specifically for use in the adjacent water park market. The product returned such impressive initial results from its first trial that Six Flags, the operator that hosted the trial has since engaged us to roll out the system in its nine water parks across North America for a six year term.  This resoundingly positive endorsement by the world's largest regional theme park operator underpins our confidence in the product, its potential and our ability to target the water park market opportunity successfully over the medium to long term.  In addition, Q-band is currently being installed at Palace Entertainments' "Splish Splash" water park in Long Island. This is good early progress for a new, emerging product and we will continue to focus hard on its development in the year ahead.

This year's progress is demonstrative of the prioritised product development roadmap for our Company. The early success seen with our smartphone-based solution is another example of this.  As announced post period-end, the Company has signed a twelve-week pilot for its innovative smartphone-based solution with one of London's best known attractions. This trial, the first of its kind in the UK, represents an important technological advancement for the Company as well as an exciting first step towards extending Lo-Q's offering outside of its core theme park base and into the promising 'single line' attraction vertical, which includes a large range of potential future customers including popular tourist sites, sport stadiums, festivals, concerts, museums and special exhibitions.

In the year ahead we plan to trial the delivery of our Q-bot system on guests' smartphones in a North American park.  This is an important development, both for opportunities in our current core geographies and as we devote increasing attention to opportunity in Asia.  We will also continue to develop our mobile ticketing, payments and scheduling software capability as we look to develop further business in 'single-line' attractions and in adjacent markets.

Board Changes

In May, we welcomed John Weston as our Non-Executive Chairman. His appointment, together with the arrival of David Gammon as Non-Executive Director, has strengthened the Board and both have made significant contributions since joining the Board.

Our People

I would like to echo the Chairman's comments and recognise the commitment and hard work of the permanent team and seasonal staff that we employ across our operation. Without their unfailing enthusiasm and hard work, the performance demonstrated this year would be impossible.

As an incentive and to reward employees for their loyalty to the Company, additional share option schemes have been established.

In addition, as announced in March 2011, the remuneration committee of the board recommended, and the board approved, an incentive arrangement to establish an employee benefit trust.  The impact of this type of senior management incentive arrangement has brought forward share dilution versus an option only incentive scheme and this explains the reduction in Earnings Per Share for the year.

FTSE Reclassification

Earlier this year, FTSE agreed that it was more appropriate for Lo-Q to be classified as a Software company within the Software sector.  This change took effect from Monday 20 June 2011.

Dividend

As consistently communicated, it is the view of the Board that the payment of a dividend is unlikely in the short to medium term, given anticipated new product investment or deployment and other investment opportunities.

Summary and Outlook for 2012

2011 was an excellent year for Lo-Q. We delivered significant progress from existing installations, announced long term contracted commitments in relation to existing and new products and established important beachheads in new markets.  In short, we have achieved every single objective we set for ourselves at the start of the year. The strategic initiatives implemented will provide the framework for longer term progress and the hard work and determination of the team together with the continued development of innovative new products has created a strong platform on which to build in 2012.

Notwithstanding the challenges of opening 11 new operations around the world, I am confident that we have initiated the momentum that will define our future business.

Tom Burnet

Chief Executive Officer

Consolidated Statement of Comprehensive Income

for the year ended 31 October 2011

			2011		2010
INCOME STATEMENT			£		£
Revenue			24,546,020		20,304,048
Cost of Sales			(18,339,014)		(15,262,254)
Gross Profit			6,207,006		5,041,794
Administrative expenses			(3,540,316)		(2,728,395)
Operating Profit			2,666,690		2,313,399
Finance costs			-		(16)
Finance income			34,825		7,203
Profit Before Tax			2,701,515		2,320,586
Tax			(760,696)		(448,077)
Profit for the year			1,940,819		1,872,509
Other Comprehensive Income
Exchange differences on translating foreign operations			74,478		(40,965)
Other Comprehensive Income for the year,
Net of Tax			74,478		(40,965)
Total Comprehensive Income for the year			2,015,297		1,831,544
Profit attributable to
Owners of the parent			1,940,819		1,872,509
Total comprehensive income attributable to
Owners of the parent			2,015,297		1,831,544
Earnings per share expressed
in pence per share:
Basic			11.54		11.69
Diluted			11.04		11.23

All activities of the company are classified as continuing.

Consolidated Statement of Financial Position

for the year ended 31 October 2011

			2011		2010
			£		£
Assets
Non-Current Assets
Intangible assets			1,182,607		1,203,770
Property, Plant, Equipment and Installed Systems			477,775		178,488
			1,660,382		1,382,258
Current Assets
Inventories			494,301		243,273
Trade and other receivables			1,134,576		828,736
Tax receivable			-		1,030
Cash and cash equivalents			7,497,791		6,018,443
			9,126,668		7,091,482
Liabilities
Current Liabilities
Trade and other payables			1,007,477		1,005,118
Tax payable			346,570		208,801
			1,354,047		1,213,919
Net Current Assets			7,772,621		5,877,563
Net Assets			9,433,003		7,259,821
Shareholder's Equity
Called up share capital			171,702		162,327
Share premium			6,515,908		5,132,482
Own Shares Held In Trust			(1,331,956)		-
Other Reserves			238,661		141,621
Retained earnings			3,838,688		1,823,391
Total equity			9,433,003		7,259,821
Total Shareholder's Equity			9,433,003		7,259,821

Consolidated Statement of Cash Flow

for the year ended 31 October 2011

			2011		2010
			£		£
Cash flows from operating activities
Cash generated from operations			2,882,023		2,987,770
Interest paid			-		(16)
Tax paid			(621,897)		(528,007)
Net cash from operating activates			2,260,126		2,459,747
Cash flows from investing activities
Purchase of intangible fixed assets			(344,050)		(741,252)
Purchase of tangible fixed assets			(532,398)		(229,610)
Interest received			34,825		7,203
Net cash used in investing activities			(841,623)		(963,659)
Cash flows from financing activities
Share Issue			837		3,410
Share Premium			60,008		80,333
Net cash from financing activities			60,845		83,743
Increase in cash and cash equivalents			1,479,348		1,579,831
Cash and cash equivalents at beginning of year			6,018,443		4,438,612
Cash and cash equivalents at end of year			7,497,791		6,018,443

 Statement of Changes in Equity

 for the year ended 31 October 2011

GROUP	Share	Retained	Share	Own	Other	Total
	capital	earnings	premium	Shares	Reserves
				Held In
				Trust
	£	£	£	£	£	£
Balance at 1 November 2010	162,327	1,823,391	5,132,482	-	141,621	7,259,821
Profit for the year	-	1,940,819	-	-	-	1,940,819
Foreign exchange	-	74,478	-	-	-	74,478
Issue of share capital	9,375	-	1,383,426	-	-	1,392,801
Own Shares Held In Trust	-	-	-	(1,331,956)	-	(1,331,956)
Recognition of share-based Payments	-	-	-	-	97,040	97,040
Balance at 31 October 2011	171,702	3,838,688	6,515,908	(1,331,956)	238,661	9,433,003

1.             ACCOUNTING POLICIES

Basis of preparation

Lo-Q plc is a public limited company incorporated in the United Kingdom, whose shares are publicly traded on the AIM market. The Company is domiciled in the United Kingdom and its registered address is Thames House, Portsmouth Road, Esher, Surrey, KT10 9AD.

The financial period represents the 52 weeks and 1 day to 31 October 2011 (prior financial year 52 weeks and 1 day to 31 October 2010). The consolidated financial statements for the 52 weeks and 1 day to 31 October 2011 comprise the financial statements of the Company and its subsidiaries ('Group'). The Group's principal activities are the development and application of virtual queuing technologies.

STATEMENT OF COMPLIANCE WITH IFRS'S

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006.  The principal accounting policies adopted by the group are set out below.

The following new standard have been adopted during the period

It has not been necessary to adopt any new standards during the year ended 31 October 2011.

New standards and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations are not effective for 2011 and therefore have not been applied in preparing these accounts. The effective dates shown are for periods commencing on the date quoted.

Amendments to IFRS 7 Financial Instrument: Disclosures (effective 1 January 2011/July 2011)

IFRS 9 Classification and Measurement of Financial Instruments (effective 1 January 2013)

IFRS 10 Consolidated Financial Statements (effective 1 January 2013)

IFRS 12 Disclosure of Interests in Other Entities (effective 1 January 2013)

IFRS 13 Fair Value Measurement (effective 1 January 2013)

Amendments to IAS 1 Presentation of Financial Statements (effective 1 January 2011/July 2012)

Amendment to IAS 12 Income Taxes (effective 1 January 2012)

Amendment to IAS 12 Employee Benefits (effective 1 January 2013)

IAS 24 Related Party transactions (revised) (effective 1 January 2011)

IAS 27 Consolidated and Separate Financial Statements (reissued) (effective 1 January 2013)

IAS 28 Investments in Associates (reissued) (effective 1 January 2013)

Amendments to IAS 34 Interim Financial Reporting (effective 1 January 2011)

The Group has considered the above new standards, interpretations and amendments to published standards that are not yet effective and concluded that they are either not relevant to the Group or that they would not have a significant impact on the Group's Financial Statements, apart from additional disclosures.

Basis of Accounting

The financial statements of Lo-Q plc have been prepared in accordance with EU Endorsed International Financial Reporting Standards and IFRIC interpretations (IFRS) and the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are noted below.

Judgment and estimates

The Group makes judgments and assumptions concerning the future that impact the application of policies and reported amounts. The resulting accounting estimates calculated using these judgments and assumptions will, by definition, seldom equal the related actual results but are based on historical experience and expectations of future events. The judgments and key sources of estimation uncertainty that have a significant effect on the amounts recognised in the financial statements are discussed below.

Impairment of assets

Financial and non-financial assets including other intangibles are subject to impairment reviews based on whether current or future events and circumstances suggest that their recoverable amount may be less than their carrying value. Recoverable amount is based on a calculation of expected future cash flows which includes management assumptions and estimates of future performance.

If there is an indication that impairment 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 amount of the cash-generating unit to which this asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of the 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 money and the risks specific to the asset for which the estimates of the 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 re-valued amount, in which case the impairment loss is treated as a revaluation decrease.

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 prior years.  A reversal of an impairment loss is recognised as income immediately unless the relevant asset is carried at a re-valued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Basis of consolidation

The consolidated financial statements incorporate the results of Lo-Q plc and all of its subsidiary undertakings as at 31 October 2011 using the acquisition method of accounting. The results of subsidiary undertakings are included from the date of acquisition.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Lo-Q (Trustees) Limited, a subsidiary company that holds an employee benefit trust on behalf of Lo-Q plc is under control of the Board of Directors and hence has been consolidated into the Group results.

The acquisition of subsidiaries is accounted for using the purchase method.  The cost of the acquisition is measured at the aggregate of the fair value, 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 under IFRS3 are recognised at their fair value at the acquisition date.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised.

Subsidiaries

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than half of the voting rights. The results of subsidiaries are included in the Group income statement from the date of acquisition.

Revenue Recognition

Turnover arises from the development and application of virtual queuing technologies. Turnover represents either total rentals, net of sales taxes, to theme park or attraction guests or the Group's share of such rental. Total rentals are accounted for where the Group is responsible for the operation within the theme park.

Turnover also includes, where applicable, revenue from the financing of installed systems to new or existing theme parks. These systems are then leased back to the Group with the lease costs being recognised within cost of sales during the period or year as they fall due.

Interest expense recognition

Expense is recognised as interest accrues, using the effective interest method, to the net carrying amount of the financial liability.

Employee expenses

The Group has applied the requirements of IFRS 2 Share-Based Payment.  In accordance with the transitional provisions, IFRS2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested as of 1 January 2007.

The Group issues equity-settled share-based payments to full time employees.  Equity settled share-based payments are measured at the fair value 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 will eventually vest.

Fair value is measured by use of a Black-Scholes model for all share options in issue.  The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioral considerations.

Commitments under operating leases

Operating lease payments are recognised as an expense in the consolidated income statement on a straight-line basis over the lease term.

Property, Plant, Equipment and Installed Systems

Items of property, plant and equipment are stated at cost of acquisition or production cost less accumulated depreciation and impairment losses.

Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives, using the straight-line method, on the following bases:

Plant and Machinery	33.3%
Office equipment	33.3%
Installed Systems	25 - 33.3% or life of contract
Furniture and fixtures	20.0%

Inventories

Stocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items.

Stocks are calculated on a first in first out basis.

Park Installations is valued on the basis of the cost of Stock items and labour plus attributable overheads.

Net realisable value is based on estimated selling price less additional costs to completion and disposal.

Deferred Tax

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 profits ("temporary differences") and is accounted for using the balance sheet liability method.

Deferred tax liabilities are generally recognised for all taxable temporary differences. Where there are taxable temporary differences arising on subsidiaries, deferred tax liabilities are recognised.

Deferred tax assets are generally recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Where there are deductible temporary differences arising on subsidiaries, deferred tax assets are recognised only where it is probable that they will reverse in the foreseeable future and taxable profits will be available against which the temporary differences can be utilised.

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 tax 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.

Research and development

In accordance with IAS 38 'Intangible Assets', expenditure incurred on research and development is distinguished as either to a research phase or to a development phase.

All advanced research phase expenditure is charged to the income statement. For development expenditure, this is capitalised as an internally generated intangible asset, only if it meets strict criteria, relating in particular to technical feasibility and generation of future economic benefits.

Development expenditure is capitalised and amortised within administrative expenses on a straight line basis over its useful economic life, which is considered to be up to a maximum of 5 years.

Intellectual property rights

Intellectual property rights comprise assets acquired relating to know how, patents and licenses and have been capitalised at the fair value of the assets acquired and are amortised within administrative expenses on a straight line basis over their estimated useful economic life of 5 and 7 years.

Foreign currency exchange

Transactions in currencies other than the functional currency of the Group are recorded at the rates of exchange prevailing on the dates of the transactions. At each 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 assets and liabilities 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.

Gains and losses arising on retranslation are included in net profit or loss for the period, except for exchange differences arising on non-monetary assets and liabilities where the changes in fair value are recognised directly in equity.

On consolidation, the assets and liabilities of the Group's overseas 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. Exchange differences arising, if any, are classified as equity and movement shown in reserves.

Pension Costs

Contributions to the Group's defined contribution pension scheme are charged to the profit and loss account in the period/ year in which they become due.

Trade and other receivables

Trade and other receivables are recognised by the Group and carried at original invoice amount less an allowance for any uncollectible or impaired amounts.

An estimate for doubtful debts is made when collection of the full amount is no longer probable.  Bad debts are written off when they are identified as being bad.

Other receivables are recognised at fair value.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and short term deposits. Short-term deposits are defined as deposits with an initial maturity of three months or less.

Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purposes of the consolidated cash flow statement.

Equity Instruments regarding share capital

Equity instruments are recorded at the proceeds received, net of direct issue costs.

2.             TAX

Analysis of the tax charge
		2011			2010
		£			£
Tax - Current Year		760,696			448,077
Deferred tax		-			-
Total tax charge in income statement		760,696			448,077
Reconciliation of tax charge
Profit on ordinary activities before tax		2,701,515			2,320,586
Tax at the UK corporation tax rate of 26.83% (2010 28%)		724,816			649,764
Effects of:
Expenses not deductable for tax		79,757			5,216
Capital allowances in excess of depreciation		(44,859)			(114,782)
Share scheme deduction		(12,719)			(92,661)
Income not chargeable for tax purposes		(7,980)			540
Profit subject to foreign taxes at an higher marginal rate		21,681			-
Total tax - Current Year		760,696			448,077

3.             EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share is calculated by dividing the net profit attributable to ordinary shareholders after adjustments for instruments that dilute basic earnings per share by the weighted average of ordinary shares outstanding during the year (adjusted for the effects of dilutive instruments).

The following reflects the income and share data used in the total operations and diluted earnings per share computations.

			2011
			Weighted		Per -share
	Earnings		average		amount
	£		number		pence
			of
			shares
Basic EPS
Earnings attributable to ordinary shareholdings	1,940,819		16,817,116		11.54
Effect of dilutive securities
Options	-		755,727		-
Diluted EPS
Adjusted earnings	1,940,819		17,572,843		11.04

4.             NOTES TO CASH FLOW - RECONCILIATION OF PROFIT BEFORE TAX TO CASH GENERATED FROM OPERATIONS

Group		2011		2010
		£		£
Profit before tax		2,701,515		2,320,586
Depreciation and Amortisation charges		598,324		367,322
Share based payment		97,040		42,000
Foreign exchange		74,478		(40,965)
Finance costs		-		16
Finance income		(34,825)		(7,203)
		3,436,532		2,681,756
(Increase)/Decrease in inventories		(251,028)		171,855
(Increase) in trade and other receivables		(305,840)		(171,692)
Increase in trade and other payables		2,359		305,851
Cash generated from operations		2,882,023		2,987,770

5.                     PUBLICATION OF NON-STATUTORY ACCOUNTS

The financial information for the year ending 31 October 2011 and the period ending 31 October 2010 has been audited but does not constitute full financial statements within the meaning of section 434 of the Companies Act 2006.

The financial information has been extracted from the Group's 2011 statutory financial statements upon which the auditor's opinion is unqualified and does not include and statement under of section 498 of the Companies Act 2006.

 

END

 

 

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