Final Results

Glen Group PLC 20 December 2005 Glen Group plc ('Glen' or 'the Group') Announcement of Final Results for the year ended 30 September 2005 Announcement of advanced negotiations to acquire an IT value added reseller The Board of Glen today announces its final results for the year ended 30 September 2005 and confirms that it is currently at an advanced stage of negotiations to acquire an IT value added reseller. The size of this proposed transaction is such that it will be defined as a reverse takeover and accordingly will be subject, amongst other things, to the approval of the Glen shareholders. As an integral part of this proposed transaction there will be a placing to raise up to Â£2.5m for the enlarged group, marketing for which will commence in early January. As a result the Board has requested that the trading of the shares in Glen should be suspended pending full details of the proposed transaction being sent to Glen shareholders and have reached agreement with AIM for this to happen with immediate effect. The expectation is that the proposed transaction, fundraising and associated documentation will be agreed and announced by 31st January 2006. Full details of the transaction will be disclosed to the shareholders of Glen in the Admission Document for the enlarged Group, which will contain the notice of EGM which is expected to be held during February 2006 and at which shareholder approval for the proposed transaction will be sought. Following the posting of the Admission Document, it is expected that the suspension in trading of shares in Glen will be lifted pending completion of the proposed transaction. Application will be made for the shares of Glen to be re-admitted to trading on AIM on completion of the proposed transaction. The Board of Glen believe that the target company is a company with a potential for significant growth, organically and by further acquisition, and recognise that its management team has the skills and experience necessary to achieve this objective within its market niche. The Group will make further announcements in due course. The highlights of our final results are as follows: 2005 2004 % Increase Turnover Â£538,397 Â£373,848 44.0% Gross Profit Â£242,368 Â£129,978 86.5% Loss before tax (Â£571,679) (Â£205,049) 178.8% Loss per share in pence per share 1.18 0.82 43.9% Net cash Â£162,991 (Â£45,717) 456.5% Key points â€¢ Strong growth in second half performance with sales up nearly 100% over first half, and sales up 44% over the year as a whole. â€¢ Gross profit up 86.5% compared to 2004. â€¢ Loss for year reflects increased costs of public company status and the costs associated with expanding the sales team. â€¢ Group well placed to grow through further acquisitions and through organic growth. Eric Hagman CBE, Chairman of Glen Group, commented: 'We have today announced that we are in advanced negotiations to acquire an IT value added reseller which under the AIM rules would be regarded as a reverse takeover, subject to shareholder approval. If concluded, this would be a significant step in our ambitions to grow into a powerful player in the added value information technology and communications sector. This potential acquisition will allow us to build a more significant platform from which we can build the business and I would like to thank the team for their efforts during the last year and I look forward to the announcement of further successes over the next year.' 20 December 2005 Enquiries: Glen Group plc Graham J Duncan, Chief Executive Officer - 0845 119 2110 College Hill Alex Walters - 0207 457 2020 Glen Group plc ('Glen' or 'the Group') Announcement of Final Results for the year ended 30 September 2005 CHAIRMAN'S STATEMENT Introduction I am delighted to present the first annual results for Glen Group plc ('the Group') since its incorporation in October 2004 and the subsequent flotation on AIM in December 2004, just one year ago. This period has been one of significant progress in which our operating company, Glen Communications Limited ('Communications'), has expanded its sales and support capability to now cover an area from Scotland to the Midlands. Glen Communications Limited is positioned as a value added reseller of integrated IT and communications focused on managing a wide range of products and services for SMEs in the United Kingdom. The ethos of the Group is focused on the concept of a one-stop-shop for SMEs and it is positioned at the customer end of the supply chain. Results In the first half year, we achieved a turnover of Â£182,421. I am pleased to report that in the second half the turnover was Â£355,976 taking the year to Â£538,397. This increase, close to 100 per cent., reflects the success of our enlarged sales team led by Craig Saunderson who we recruited in May 2005. The turnover for 2005 also compares well against our turnover of Â£373,848 for the whole of 2004. Our gross profit for 2005 of 45.02 per cent. also compares well against the 2004 figure of 34.77 per cent. Our loss for 2005 was Â£571,679 against Â£205,049 for 2004. However these two figures do not stand up to comparison as the 2005 loss reflects the materially higher costs of the Group as a public company. Fuller details are contained in the Chief Executive Officer's Report. Funding As announced in my interim statement, we raised a further Â£300,000 before costs, in June 2005 to give us additional working capital and since the year end we have raised a further Â£250,000 before expenses, again to be used as further working capital as we seek to move the business deeper into the important English market. Outlook Having now worked with the business model we have adopted, we are comfortable that it can deliver the results we seek. The key is to ensure that we can resource the right people across all levels of the Group and develop the people we have so that they can deliver the service and skill set that customers demand. Inevitably, this takes time to develop. Our entire business philosophy is based around the customer experience, from the professional sale through implementation, training and after sale care and support. I would draw your attention to Note 30 of our results which gives more detail concerning the advanced negotiations to acquire an IT value added reseller announced today. Having now been with the Group for one year, I am impressed by the enthusiasm and commitment contained in its people. The development of the Group to date is in no small way down to the vision, and determination, of the Group Chief Executive, Graham J Duncan. I would like to thank him and the team for their efforts during the last year and I look forward to the announcement of further successes over the next year. Eric M Hagman CBE Chairman CHIEF EXECUTIVE OFFICER'S REPORT Background The flotation of Glen Group plc ('the Group') in December 2004 was the first step of a journey which started in February 2002 with the creation of Glen Communications Limited ('Communications'). Communications was started from a zero base in a small industrial unit in Dalkeith, near Edinburgh with the intention of building a value added reseller in the telecommunications space. With that intention, we moved to hire a single sales executive, and a second individual with a customer support and marketing background, to move the business forward. Throughout 2002 and 2003 we made good progress, with very limited resources, recognising that we had to develop a sales platform which could deliver sales opportunities and open doors for our expanding set of products and services. During 2003 we also moved to create an IT skill set within Communications and eventually acquired Soluis IT Limited in May 2004. This acquisition recognised the importance of IT in the changing world of telecommunications, and set the scene for our future direction. The year ended 30 September 2005 has seen significant expansion following the successful admission of our ordinary shares to trading on AIM in December 2004. Coming onto the AIM market as a very small company creates both opportunities and challenges. The public company has given us greater exposure but the challenge is to grow, and to grow quickly. This requires an acquisition strategy as well as an organic one. Our ability to grow is dependent on the quality of our people. We currently have a sales group of nine and over time will seek to expand that team. The key to success is based on the productivity of each member of the sales team. In this respect, we instil in them a need to approach the sale in a professional way and give them a measurable set of tools to achieve their personal objectives. Since expanding the team, we have fine tuned both our skill set and the products and services that we deliver. In the SME market we recognise that customers will not necessarily buy the complete solution from ourselves. We therefore lead our sales approach with specific products and services and concentrate specifically on the following: (a) IT Services The Group offers a range of IT solutions including server installation management and support, router deployment and management, and desk top installation support and management. Other IT services include maintenance and support for client's IT infrastructure, virus protection and monitoring solutions. The Group also advises clients on telecommunication bandwidth requirements, such as broadband, and network access and security, including wireless access and VPN. The Group provides connectivity in conjunction with various suppliers who provide ISP services across the UK. (b) Mobile Mobile voice and data is currently the single largest revenue stream within the group. The Group offers an account management service that manages customers' mobile accounts with any of the five mobile networks in the UK. Glen Communications has also recently become a channel partner for a Vodafone service provider bringing another dimension to the portfolio. The Group has developed a particular expertise in the deployment and provisioning of 'Blackberry(TM)' email solutions to the business market. (c) Broadband Voice (VoIP) Broadband voice is a step-change technology that allows voice to travel over data networks. The Directors believe that this has profound implications for telecommunications costs and will help drive down costs and expand value-added services over the next few years. As the technology develops, the Group is introducing VoIP to its customers and potential customers in a controlled way by first introducing a hosted VoIP service which delivers many value added features to the customer without the need for a PBX. (d) Maximizer(TM) Maximizer(TM) is a CRM solution aimed at the SME and small corporate market and during the year we were pleased to sign a reseller agreement with Maximizer(TM). Business information particularly customer information is a valuable asset and it is important to use this information to ensure that a business grows. Glen Communications has a team of specialist sales and technical people who are experienced in discussing and specifying tailored CRM systems using Maximizer(TM). We were also delighted that Glen Communications was awarded the Maximiser(TM) initiated channel partner 'Best website marketing award for 2005.' Results Turnover for the year was Â£538,397 with over 80 per cent. coming from our IT (including Maximizer(TM)) and mobile activities. Our gross profit of 45.02 per cent. has held up very well and we are pleased with the second half performance, in particular, as the first half did not benefit from the increased activity which started to build only after the appointment of our Head of Sales in May 2005. At our year end our Head of Sales had been in place for less than five months so I am particularly pleased with the progress over that period. Our operating costs, totalling Â£804,654, include Â£215,962 of costs directly relating to the holding company. The holding company costs did not exist the previous year. The holding company costs cover a ten month period from 1 December 2004 and they are a measure of the ongoing costs of our AIM listing, including the costs of the Group board. Excluding these costs, the operating company incurred operating costs of Â£588,692 against Â£333,994 the previous year. The increased costs are predominantly salary based as we increase our head count, particularly in sales. Bringing people into the business creates a cost base ahead of any sales activity as they have to be recruited and trained which takes time. Once prospective clients are identified, it takes further time to undertake the consultancy, produce and agree the client proposal and, hopefully, close the sale. We target individual members of our sales team on a monthly basis which requires them each to deliver a minimum gross profit in the month, with a further higher target to aim at. The business model in this respect, is therefore relatively simple as we can calculate what productivity we need as a whole to deliver an overall Group profit. Working to achieve this is our key objective. Overall, the Group has incurred an operating loss of Â£562,286 compared to Â£204,016. There is no tax charge for the year and the Group continues to have unrelieved tax losses available. Cash and borrowings At 30 September 2005 the Group had cash resources of Â£211,160. The Group also had an overdraft of Â£48,169 giving Group net cash of Â£162,991. The Group had a term loan outstanding at 30 September 2005 amounting to Â£78,516, and sums due to Directors and a related party of a Director, totalling Â£40,000. The latter sums were repaid in early December in accordance with the terms of the loans. Our overdraft facility, of Â£50,000, has recently been renewed and is available to the Group until 31 December 2006. Funding The flotation on 1 December 2004 raised Â£750,000, before costs. A further Â£300,000 was raised in June 2005, again before costs. The combined costs of these fund raisings, including the costs of the AIM admission, totalled Â£242,549, and this sum has been deducted from the share premium account. Since the year end we have raised a further Â£250,000 before costs to boost our working capital. Outlook and opportunities Since coming to the market the Board have stated that we intend building value over time through organic growth and by acquisition. The latter is very important to our growth plans. We look forward to developing this strategy and doing what we are good at, namely adding value for our clients by providing them with a professional service. Graham J Duncan Chief Executive Officer PRINCIPAL ACCOUNTING POLICIES The financial information set out within this preliminary announcement does not constitute the company's statutory financial statements for the year ended 30 September 2005 or the year ended 30 September 2004 but is derived from those financial statements. Those financial statements have been reported on by the Company's auditors. The report of the auditors was unqualified and did not contain a statement under S.237 (2) or (3) Companies Act 1985. The statutory financial statements of the subsidiary, Glen Communications Limited, for the year ended 30 September 2004 have been delivered to the Registrar of Companies. The statutory financial statements for the year ended 30 September 2005 will be delivered to the Registrar of Companies following the company's Annual General Meeting. Basis of accounting The financial statements have been prepared under the historical cost convention, and in accordance with applicable accounting standards. The principal accounting policies of the company and its subsidiaries have remained unchanged from the previous year and are set out below. Basis of preparation During the year the group carried out a corporate restructuring including the introduction of a new holding company Glen Group plc, incorporated on 14 October 2004. On 15 November 2004, the company acquired the entire issued share capital of its subsidiary, Glen Communications Limited, for a consideration of Â£750,000 by way of a share for share exchange. The results shown in the profit and loss account are pro-forma, incorporating the results of Glen Communications Limited ('Communications') for the period from 1 October to 14 November 2004 and the consolidated results of Glen Group plc ('Group') for the period from 15 November 2004 to 30 September 2005. The comparative figures for the year ended 30 September 2004 are extracted from the audited results of Communications for that year. The balance sheet as at 30 September 2005 is the consolidated balance sheet of Group. The comparative consolidated balance sheet at 30 September 2004 is pro forma and is derived from the audited balance sheet of Communications. Basis of consolidation The financial information includes the financial information of the Company and its subsidiaries. The combination of Glen Communications Limited ('Communications') and Glen Group plc ('Group') qualifies for merger accounting which aggregates the results of Group and Communications without creating any acquisition goodwill. As a result the profit and loss account shown in the consolidated balance sheet represents the aggregation of accumulated profits and losses since both companies were incorporated. Merger accounting Where merger accounting is used, the investment is recorded in the company's balance sheet at the nominal value of the shares issued together with the fair value of any additional consideration paid. In the group financial statements, merged subsidiary undertakings are treated as if they had always been a member of the group. The results of such a subsidiary are included for the whole period in the year it joins the group. The corresponding figures for the previous year include its results for that period, the assets and liabilities at the previous balance sheet date and the shares issued by the company as consideration as if they had always been in issue. Any difference between the nominal value of the shares acquired by the company and those issued by the company to acquire them is taken to reserves. Goodwill Positive goodwill arising on acquisitions is capitalised, classified as an Intangible Asset on the balance sheet and amortised on a straight line basis over its useful economic life, which is estimated at 10 years. It is reviewed for impairment at the end of its first full financial year following the acquisition and in other periods if events or changes in circumstances indicate that the carrying value may not be recoverable. If a subsidiary is subsequently sold, any goodwill arising on acquisition that has not been amortised through the profit and loss account is taken into account in determining the profit or loss on sale. The directors consider the economic life of goodwill based on each acquisition made by the company. Turnover Turnover is the total amount receivable by the company in the ordinary course of business with outside customers for goods supplied as a principal and for services provided, excluding VAT and trade discounts. Turnover from mobile commissions is recognised when the customers are connected to the relevant network. Turnover from information technology services are billed to clients in accordance with agreed terms, in line with performance of the contract. Turnover from the sale of pre-paid phone cards is recognised when the cards are used, excluding VAT and trade discounts. Deferred taxation Deferred taxation is recognised on all timing differences where the transactions or events that give the company an obligation to pay more tax in the future, or a right to pay less tax in the future, have occurred by the balance sheet date. Deferred tax assets are recognised when it is more likely than not that they will be recovered. Deferred tax is measured using rates of tax that have been enacted or substantively enacted by the balance sheet date. Foreign currencies Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. When exchange differences result from the translation of foreign currency borrowings raised to acquire foreign assets they are taken to reserves and offset against the differences arising from the translation of those assets. All other exchange differences are dealt with through the profit and loss account. Fixed assets All fixed assets are initially recorded at cost. Depreciation Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows: Plant & Machinery - over 3 years Fixtures & Fittings - over 3 years Motor Vehicles - over 3 years Equipment - over 3 years Investments Investments are included at cost less amounts written off. Stocks Stocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items. Operating lease agreements Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged against profits on a straight line basis over the period of the lease. Retirement benefits The group operates a defined contribution pension scheme. Pension costs are charged to the profit and loss account in the period to which they relate. Financial instruments Financial assets are recognised in the balance sheet at the lower of cost and net realisable value. Provision is made for diminution in value where appropriate. Income and expenditure arising on financial instruments is recognised on the accruals basis, and credited or charged to the profit and loss account in the financial period to which it relates. CONSOLIDATED PROFIT AND LOSS ACCOUNT 2005 2004 Year ending 30 September 2005 Note Â£ Â£ Turnover 1 538,397 373,848 Cost of sales 296,029 243,870 -------- ------ Gross profit 242,368 129,978 Other operating income and charges 2 804,654 333,994 -------- ------ Operating loss 3 (562,286) (204,016) Interest receivable 6,716 110 Interest payable and similar charges 6 (16,109) (1,143) -------- ------ Loss on ordinary activities before taxation (571,679) (205,049) Tax on loss on ordinary activities - - -------- ------ Loss for the financial year, carried forward (571,679) (205,049) -------- ------ Basic loss per share (pence) 7 1.18 0.82 -------- ------ During the period the group carried out a corporate restructuring including the introduction of a new holding company. The profit and loss account has been prepared using merger accounting and is presented on a pro forma basis as if the group has been in existence throughout both the current and the prior periods. The consolidated profit and loss account from the date of incorporation of the new holding company is given in note 27. All of the activities of the group are classed as continuing. The company has no recognised gains or losses other than the results for the year as set out above. The accompanying accounting policies and notes form part of these financial statements. CONSOLIDATED BALANCE SHEET 2005 2004 As at 30 September 2005 Note Â£ Â£ Fixed assets 9 50,317 11,529 Tangible assets Intangible assets 10 17,079 18,977 --------- ------ 67,396 30,506 --------- ------ Current assets 12 10,113 8,236 Stocks Debtors 13 208,626 62,858 Cash at bank and in hand 211,160 26 --------- ------ 429,899 71,120 Creditors: amounts falling due within one year 14 346,809 143,788 --------- ------ Net current assets/(liabilities) 83,090 (72,668) --------- ------ Total assets less current liabilities 150,486 (42,162) --------- ------ Creditors: amounts falling due after 15 58,516 101,730 more than one year --------- ------ 91,970 (143,892) --------- ------ Capital and reserves 18 600,000 250,000 Called-up equity share capital Share premium account 19 957,541 500,000 Other reserves 20 (101,914) (101,914) Profit and loss account 21 (1,363,657) (791,978) --------- ------ Shareholders' funds/(deficiency) 22 91,970 (143,892) --------- ------ The accompanying accounting policies and notes form part of these financial statements COMPANY BALANCE SHEET 2005 As at 30 September 2005 Note Â£ ------- Fixed assets 11 1,550,000 Investments ------- 1,550,000 ------- Current assets 13 11,590 Debtors Cash at bank and in hand 210,081 ------- 221,671 Creditors: amounts falling due within one year 14 130,092 ------- Net current assets 91,579 ------- Total assets less current liabilities 1,641,579 ------- Capital and reserves 18 600,000 Called-up equity share capital Share premium account 19 957,541 Profit and loss account 21 84,038 ------- Shareholders' funds 22 1,641,579 ------- The accompanying accounting policies and notes form part of these financial statements CONSOLIDATED CASH FLOW STATEMENT 2005 2004 Year ending 30 September 2005 Â£ Â£ Â£ Â£ RECONCILIATION OF OPERATING LOSS TO (562,286) (204,016) NET CASH OUTFLOW FROM OPERATING ACTIVITIES Operating loss from continuing activities Depreciation 17,514 6,497 Amortisation 1,898 - (Increase)/decrease in stock (1,877) 447 Increase in debtors (145,767) (14,504) Increase in creditors 166,596 41,456 -------- ------ Net cash outflow from continuing operating (523,922) (170,120) activities CASH FLOW STATEMENT (523,922) (170,120) NET CASH OUTFLOW FROM CONTINUING OPERATING ACTIVITIES RETURNS ON INVESTMENTS AND 6,716 110 SERVICING OF FINANCE Interest received Interest paid (16,109) (1,143) --------- -------- Net cash outflow from returns on (9,393) (1,033) investments and servicing of finance CAPITAL EXPENDITURE AND (56,492) (8,175) FINANCIAL INVESTMENT Purchase of tangible fixed assets Sale of tangible fixed assets 190 698 --------- -------- Net cash outflow from capital (56,302) (7,477) expenditure and financial investment FINANCING 1,050,000 55,678 Issue of shares Receipt of bank finance - 100,000 Repayment of borrowing (16,486) (5,000) Receipt from/(repayment of) 7,270 (23,528) shareholders loans Expenses paid in connection with (242,459) - share issues --------- -------- Net cash inflow from financing 798,325 127,150 -------- ------ INCREASE/(DECREASE) IN CASH 208,708 (51,480) -------- ------ CONSOLIDATED CASH FLOW STATEMENT 2004 Cash Flows 2005 ANALYSIS OF NET FUNDS/(DEBT) Â£ Â£ Â£ Cash 26 211,134 211,160 Bank overdraft (45,743) (2,426) (48,169) ------- --------- ------ (45,717) 208,708 162,991 ------- --------- ------ Debt (127,730) 9,214 (118,516) ------- --------- ------ Net (debt)/funds (173,447) 217,922 44,475 ------- --------- ------ NOTES TO THE FINANCIAL STATEMENTS 1. Turnover The turnover and loss before tax are attributable to the one principal activity of the company. An analysis of turnover is given below: 2005 2004 Â£ Â£ United Kingdom 538,397 373,848 -------- ------ 2. Other operating income and charges 2005 2004 Â£ Â£ Administrative expenses 804,654 333,994 -------- ------ 3. Operating loss 2005 2004 Operating loss is stated after charging: Â£ Â£ Depreciation of owned fixed assets 17,514 6,497 Amortisation of goodwill 1,898 - Other operating lease rentals: 15,730 10,892 - buildings - office equipment 1,032 672 Auditors' remuneration: 9,000 3,800 Audit fees: - company - group 8,500 - Non audit fees: - - - company - group 675 - -------- ------ In addition, remuneration paid to the auditors in respect of the flotation, totalling Â£26,651 has been included within the share premium account. 4. Directors and employees The average number of staff employed by the company during the financial year amounted to: 2005 2004 No No Number of management staff 5 2 Number of operational staff 12 4 ------ ------ Employee numbers include directors. 17 6 4. Directors and employees (Continued) The aggregate payroll costs of the above were: 2005 2004 Â£ Â£ Wages and salaries 431,197 203,504 Social security costs 44,247 22,701 Other pension costs 10,675 - -------- ------ 486,119 226,205 -------- ------ Employee costs are stated including directors, but excluding fees payable to E M Hagman which are shown in Note 5. 5. Directors Remuneration in respect of directors was as follows: 2005 2004 Fees Salaries Pensions Benefits Totals Totals E M Hagman 18,334 - - 18,334 - G J Duncan - 90,000 9,375 2,936 102,311 60,000 P J Ford - 14,167 - 14,167 10,000 ------------------------------------------------------------------------------ 18,334 104,167 9,375 2,936 134,812 70,000 In 2004 the remuneration of directors consisted only of salaries. 6. Interest payable and similar charges 2005 2004 Â£ Â£ Interest payable on bank borrowing 1,972 1,143 Other similar charges payable 14,137 - ----------- ------- 16,109 1,143 ----------- ------- 7. Loss per share 2005 2004 Â£ Â£ Loss attributable to ordinary shareholders 571,679 205,049 Weighted average number of ordinary shares No No in issue 48,333,333 25,000,000 Loss per share (pence) 1.18 0.82 ----------- ------- FRS 14 requires presentation of diluted EPS to reflect all outstanding share options where their future exercise would decrease net profit or increase net loss per share. For a loss making company with outstanding share options, net loss per share would only be increased by the exercise of out-of-the-money options. Since it seems inappropriate to assume that option holders would act irrationally and there were no other diluting share issues, diluted EPS has not been presented for the year ended 30 September 2005. 8. Tax on loss on ordinary activities The tax charge/credit represents 2005 2004 Â£ Â£ United Kingdom corporation tax at 19% (2004:19%) Total current tax - - Total deferred tax (Note 26) - - ------------------ -------- ----- Tax on profit on ordinary - - activities ------------------ -------- ----- Unrelieved tax losses of Â£1,049,850 remain available to offset against future taxable trading profits. See note 26. Factors affecting tax charge for the period. The tax assessed for the period is higher than the standard rate of corporation tax in the UK of 19 per cent. (2004: 19 per cent.). The differences are explained 2005 2004 as follows: Â£ Â£ Loss on ordinary activities before tax (571,679) (205,049) Loss on ordinary activities multiplied by (108,619) (38,959) standard rate of corporation tax in the UK of 19% (2004: 19%) Expenses not deductible for tax purposes 963 356 Capital allowances for the period in excess of depreciation (1,963) 1,234 Tax losses available to carry forward 109,619 37,369 --------- ------ Current tax charge for the period - - --------- ------ 9. Tangible fixed assets Plant & Fixtures & Motor Equipment Total Machinery Fittings Vehicles Group Â£ Â£ Â£ Â£ Â£ Cost At 1 October 2004 765 2,752 1,489 16,984 21,990 Additions 1,360 8,974 - 46,158 56,492 Disposals - - - (190) (190) -------------------------------- ------- ------- --------- ------ At 30 September 2005 2,125 11,726 1,489 62,952 78,292 -------------------------------- ------- --------- ------ Depreciation At 1 October 2004 297 1,070 207 8,887 10,461 Charge for the year 475 2,015 496 14,528 17,514 -------------------------------- ------- ------- --------- ------ At 30 September 2005 772 3,085 703 23,415 27,975 -------------------------------- ------- ------- --------- ------ Net book value At 30 September 2005 1,353 8,641 786 39,537 50,317 -------------------------------- ------- ------- --------- ------ At 30 September 2004 468 1,682 1,282 8,097 11,529 -------------------------------- ------- ------- --------- ------ 10. Intangible fixed assets Group 2005 2004 Goodwill Â£ Â£ Cost 18,977 - At 1 October Additions - 18,977 Disposals - - --------------------------------------- --------- ----- At 30 September 18,977 18,977 --------------------------------------- --------- ----- Amortisation - - At 1 October Charge for the year 1,898 - --------------------------------------- --------- ----- At 30 September 1,898 - --------------------------------------- --------- ----- Net book value 17,079 18,977 At 30 September --------------------------------------- --------- ----- During the year to 30 September 2004 Glen Communications Limited purchased 100 per cent. of the issued share capital of Soluis IT Limited. The goodwill reflects the excess of the purchase consideration over the underlying net assets acquired. 11. Fixed asset investments 2005 2004 Company Investment in subsidiaries Â£ Â£ Cost - - At 1 October Additions 1,550,000 - Disposals - - --------- ------ At 30 September 1,550,000 - --------- ------ Net book value 1,550,000 - At 30 September --------- ------ On 15 November 2004 24,999,998 ordinary shares were issued at Â£0.03 per share in consideration of the acquisition of the entire issued share capital of Glen Communications Limited. On 30 September 2005 the company invested Â£800,000 in Glen Communications Limited. At 30 September 2005, the company held the following: Country Owned by Nature of Company of Class of the business registration share company Glen Communications Limited UK Ordinary 100% Integrated shares communications service provider Glen Project Management Limited UK Ordinary 100% Dormant shares In addition, Glen Communications Limited holds 100 per cent. of the ordinary shares of Soluis IT Limited, a dormant company. 12. Stocks Group Company 2005 2004 2005 Â£ Â£ Â£ Goods for resale 10,113 8,236 - -------- ------- ------ 13. Debtors Group Company 2005 2004 2005 Â£ Â£ Â£ Trade debtors 51,615 50,940 - Other debtors 2,090 - - Prepayments and accrued income 154,921 11,918 11,590 -------- ------- ------ 208,626 62,858 11,590 -------- ------- ------ 14. Creditors: amounts falling due within one Group Company year 2005 2004 2005 Â£ Â£ Â£ Bank loans and overdrafts (Note 16) 68,169 65,743 - Trade creditors 126,583 25,811 23,528 Amounts owed to group undertakings - - 80,307 Other taxation and social security 42,217 13,513 20,937 Other creditors 3,000 9,553 - Directors' loans (Note 16) 28,000 - - Accruals and deferred income 78,840 29,168 5,320 -------- ------- ------ 346,809 143,788 130,092 -------- ------- ------ Included within accruals are amounts totalling Â£12,000 (2004: Â£6,000) due to Duncan Ventures Limited. Further details are included in note 16. 15. Creditors: amounts falling due after more than one year Group Company 2005 2004 2005 Â£ Â£ Â£ Bank loans and overdrafts (Note 16) 58,516 75,000 - Directors' loans (Note 16) - 26,730 - -------------------------------- ------- ------- ------ 58,516 101,730 -------------------------------- ------- ------- ------ 16. Borrowing Group Company 2005 2004 2005 Â£ Â£ Â£ Due within one year: 48,169 45,743 - - bank overdraft - bank loan 20,000 20,000 - - directors' loans 28,000 - - - loan due to a related party 12,000 6,000 - Due between two and five years: - - - - bank overdraft - bank loan 58,516 75,000 - - directors' loans - 26,730 - - loan due to a related party - - - -------- ------- ------ 166,685 173,473 - -------- ------- ------ The bank overdraft and bank loan are secured by a Floating Charge held by the Bank of Scotland over all of the assets and undertakings of Glen Communications Limited. The overdraft and loan are also secured by personal guarantees given by the directors of Glen Communications Limited. The bank overdraft and bank loan bear interest at 2.75 per cent. above the base rate of HBoS plc. The directors' loans are unsecured and were interest free for the period ended 30 November 2004. From that date the loans have borne interest at 2.75 per cent. above the base rate of HBoS plc and are due for repayment on the 1 December 2005. At the year end the directors loans were represented by amounts due to P Ford totalling Â£20,000 (2004: Â£23,538) and G Duncan totalling Â£8,000 (2004: Â£3,192). The loan due to a related party is due to Duncan Ventures Limited, a company controlled by Graham J Duncan. This loan is unsecured and was interest free for the period ended 30 November 2004. From that date the loan has borne interest at 2.75 per cent. above the base rate of HBoS plc and is due for repayment on the 1 December 2005. 17. Leasing commitments At 30 September 2005 the group had annual commitments under non-cancellable operating leases as set out below: 2005 2004 Land & Other Land& Other Buildings Items Buildings Items Operating leases which expire: 8,666 49,607 12,300 258 Within 1 year Within 2 to 5 years - 109,022 - 8,804 -------- -------- --------- ----- 8,666 158,629 12,300 9,062 -------- -------- --------- ----- Certain obligations of the subsidiary company have been guaranteed by the holding company. At the year end sums guaranteed amounted to Â£24,306 (2004: Â£Nil). 18. Share capital Authorised share capital: 2005 2004 No Â£ No Â£ Ordinary shares of Â£0.01 each 80,000,000 800,000 80,000,000 800,000 --------- ------- --------- ------ Allotted, called up and fully paid: 2005 2004 No Â£ No Â£ Ordinary shares of Â£0.01 each 60,000,000 600,000 25,000,000 250,000 --------- ------- --------- ------ Although the company was incorporated on 14 October 2004, comparative balances (that relate only to the group) have been presented on a pro forma basis. This is to comply with the provisions of merger accounting, as noted in the accounting policies, whereby the group is treated as if it had always been in existence. Upon incorporation, two subscriber shares of Â£0.01 each were issued at par. On 15 November 2004, 24,999,998 ordinary shares of Â£0.01 each were issued at Â£0.03 per share in consideration for the transfer to the company of the entire issued share capital of Glen Communications Limited. On 24 November 2004 options over 666,667 ordinary shares of Â£0.01 each were granted to E M Hagman at Â£0.03 per share. On 25 November 2004 the Company entered into a placing agreement with Seymour Pierce Limited and Seymour Pierce Ellis Limited pursuant to which Seymour Pierce Ellis agreed to place 25,000,000 ordinary shares of Â£0.01 each at a price of Â£0.03 pence per share on behalf of the Company. The placing was conditional, inter alia, upon admission of the Company's share capital to the AIM market of the London Stock Exchange which took effect on 1 December 2004. This issue raised Â£750,000 (before expenses). On 20 June 2005 the Company issued a further 10,000,000 ordinary shares of Â£0.01 each at Â£0.03 per share to raise a further Â£300,000 (before expenses). Post balance sheet event On 27 October 2005, the company issued a further 10,000,000 new ordinary shares of 1p each at 2.50 pence per share. The new ordinary shares will rank pari passu with the existing ordinary shares. 19. Share premium account Group Company 2005 2004 2005 Â£ Â£ Â£ Balance brought forward 500,000 500,000 - Premium on shares issued in the year 700,000 - 1,200,000 Share issue expenses (242,459) - (242,459) -------- ------- ------- Balance carried forward 957,541 500,000 957,541 -------- ------- ------- During the year the Company issued 35,000,000 ordinary shares of Â£0.01 each at a premium of Â£0.02 each. 20. Other reserves Group Company 2005 2004 2005 Balance brought forward (101,914) (201,093) - Issue of shares in subsidiary - 99,179 - Balance carried forward (101,914) (101,914) - This relates to the acquisition of Glen Communications Limited which qualifies for merger accounting. 21. Profit and loss account Group Company 2005 2004 2005 Â£ Â£ Â£ Balance brought forward (791,978) (586,929) - Accumulated profit/(loss) for the year (571,679) (205,049) 84,038 --------- --------- ----- Balance carried forward (1,363,657) (791,978) 84,038 --------- --------- ----- The parent company has taken advantage of section 230 of the Companies Act 1985 and has not included its own profit and loss account in these financial statements. 22. Reconciliation of movements in shareholders' funds Group Company 2005 2004 2005 Â£ Â£ Â£ Profit/(loss) for the financial year (571,679) (205,049) 84,038 New share capital subscribed 350,000 - 600,000 Net premium on new shares 457,541 - 957,541 Issue of shares in subsidiary - 99,179 - ----------- ----------- ----------- Movement on shareholders' equity 235,862 (105,870) 1,641,579 Opening shareholders' equity/(deficit) (143,892) (38,022) - -------- ------- ------- Closing shareholders' equity/(deficit) 91,970 (143,892) 1,641,579 -------- ------- ------- 23. Financial instruments The group finances its operations through equity and bank borrowings. During the two years ended 30 September 2005, Glen Communications Limited was also financed by loans from its directors and by Duncan Ventures Limited, a company controlled by Graham J Duncan. No speculative treasury transactions are undertaken and during the last two years no derivative contracts were entered into. Financial assets and liabilities include those assets and liabilities of a financial nature, namely cash, investments and borrowings. Short term debtors and creditors have been excluded from the following disclosures. The fair value of the Group's financial assets and liabilities is not materially different to book value. 23. Financial instruments (Continued) 2005 2004 Â£ Â£ -------- ------ Financial assets 211,160 26 The group's financial assets and their maturity profile are: Cash at bank and in hand -------- ------ Maturing 211,160 26 One year or less on demand -------- ------ Financial liabilities 48,169 45,743 The group's financial liabilities and their maturity profile are: Bank overdraft Bank loan 78,516 95,000 Directors' loans 28,000 26,730 Loan due to a related party 12,000 6,000 -------- ------ 166,685 173,473 -------- ------ An analysis of the maturity of group debt is given in note 16. Liquidity risk The group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. The group policy throughout the year has been to ensure continuity of funding by a combination of equity funding and available bank facilities. Interest rate risk The interest rate on the group's cash at bank is determined by reference to the bank rate. The interest rates on all the group's financial liabilities are at 2.75 per cent. above the base rate of HBoS plc. The group has a committed overdraft facility of Â£50,000 (2004: Â£50,000) which falls due for renewal in December 2006. The group has a Â£100,000 five year term loan facility repayable in 60 monthly instalments of capital and interest, with the final payment falling due in 2009. 24. Acquisition On 15 November 2004, the entire issued share capital of Glen Communications Limited was acquired via a share exchange. The combination has been accounted for using the merger method of accounting. Further details of the transaction are included in Accounting Policies, Basis of Preparation. 25. Controlling related party At 30 September 2005 there was no ultimate controlling party and the Company was not a subsidiary of a parent undertaking. 26. Deferred tax Deferred tax liability/(asset) provided for in the financial statements is set out below. Group Company Unrecognised Unrecognised 2005 2004 2005 Â£ Â£ Â£ Accelerated capital allowances 130 (1,833) - Tax losses carried forward (199,472) (89,663) - --------- --------- ----- (199,342) (91,496) - --------- --------- ----- Deferred tax assets have not been recognised in respect of these losses due to the current trading position of the group. 27. Glen Group plc consolidated profit and loss account from date of incorporation on 14 October 2004 to 30 September 2005 Â£ Group turnover 437,803 Cost of sales (243,470) ----------- Gross profit 194,333 Other operating income and charges (736,121) ----------- Operating loss (541,788) Interest receivable 6,716 Interest payable and similar charges (14,160) ----------- Loss on ordinary activities before taxation (549,232) Tax on loss on ordinary activities - ----------- Loss for the period (549,232) ======= The profit and loss account above is required by the Companies Act 1985 and covers the first statutory accounting reference period of Glen Group plc from its date of incorporation on 14 October 2004 to 30 September 2005. Disclosure notes for this period are not presented as the Directors do not believe they would provide meaningful information to users of the accounts. 28. Capital commitments There were no capital commitments at 30 September 2005 or 30 September 2004. 29. Contingent liabilities There were no contingent liabilities at 30 September 2005 or 30 September 2004. 30. Post balance sheet events On 27 October 2005, the company issued a further 10,000,000 new ordinary shares of 1p each at 2.50 pence per share. The new ordinary shares will rank pari passu with the existing ordinary shares. As at 20 December 2005, the Company is in advanced negotiations to acquire, subject to shareholder approval, funding, and the re-admission to AIM of the proposed enlarged share capital of the Company, the entire issued share capital of a company, which is an IT value added reseller. The name of the target and the outline terms have not been released due to obligations of confidentiality. In conjunction with the proposed acquisition, the Directors have announced that they intend to conduct a placing of ordinary shares by the Company to raise approximately Â£2,500,000 which will be used principally to satisfy the proposed cash element of the acquisition and to pay the costs of the acquisition, the placing, and the re-admission to AIM of the enlarged share capital of the Company. This information is provided by RNS The company news service from the London Stock Exchange

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