Interim Results
Flomerics Group PLC
19 September 2007
Flomerics Group plc
("Flomerics" or "the Company") (AIM: FLO)
Half Year Highlights
Flomerics Group plc, the global supplier of simulation software to the
engineering and electronics industries, today announces its results for the six
months ended 30 June 2007
• Turnover grew 23% to £7.0 million (2006: £5.7 million)
• Turnover grew by 11% at constant exchange rates excluding the contribution
from NIKA products
• Adjusted loss before tax of £545,000 (2006: profit of £240,000)*
• European turnover grew by 26% and turnover in Asia grew by 35% (without
NIKA contribution and at constant rates)
• Good progress with the Engineering Fluid Dynamics (EFD) product range in
markets where it is was introduced earlier; 85% increase in number of new
seats installed
• New EFD customers include ZF, Mitsubishi, Panasonic and Schlumberger
• Cash balance of £1.6 million (2006: £4.0 million) with £1.7 million
expended on acquisitions since June 2006 and positive operating cash flow in
the period.
Commenting on the results, David Mann, Chairman of Flomerics plc, said: "We are
confident that the acquisition of NIKA will prove to be a very good strategic
development for Flomerics, as it has broadened and enhanced our range of
world-leading products. Forecasting for the EFD product line in new territories
remains difficult and we have scaled back our expectations for the short term.
However we are confident that investments in the EFD sales channels will bring
significant benefits in 2008."
* Adjusted loss / profit is before amortisation of intangibles, capitalisation
of development costs and share based payments.
www.flomerics.com
Flomerics Group +44 20 8487 3000
Gary Carter, Chief Executive
Chris Ogle, Finance Director & Company Secretary
Conduit PR +44 20 7429 6604
Christian Taylor-Wilkinson, Charlie Geller +44 7970 067320
Oriel Securities Limited +44 20 7710 7600
Andrew Edwards
Chairman's Statement
Overview
In the first six months of the year, the Company has continued to grow the
business from its established products (i.e. those products that predated the
acquisition of NIKA). Good progress has been made following the integration of
NIKA and we have seen strong sales in the regions where the acquired EFD product
lines were introduced some time ago. The number of new seats of EFD software
installed has increased by 85% compared with the same period last year.
Significant investments were made in the period to introduce the EFD products
into other markets, especially the US. The associated revenues are taking
longer than expected to build up and as a result the Company has made a loss in
the first half of the year.
For the first time, the results have been stated under International Financial
Reporting Standards (IFRS) and the comparative numbers for the prior year period
and for the year ended 31 December 2006 have been restated accordingly.
Results
Turnover was £7.0 million (2006: £5.7 million) representing growth of 23%. This
includes the contribution from the NIKA business. Turnover growth excluding the
contribution from NIKA and at constant rates of exchange was 11%.
The Company made a loss before taxation of £805,000 compared to a profit in the
half year to 30 June 2006 of £138,000. These figures include adjustments made to
comply with IFRS and FRS 20 on the amortisation of intangibles, the
capitalisation of Development costs and charges for share-based payments.
Without these adjustments, the result for the period was a loss of £545,000
(compared to an adjusted profit for the half year to 30 June 2006 of £240,000).
The cash balance at 30 June 2007 was £1.6 million, compared with £4.0 million a
year earlier. Since June 2006 £1.7 million of cash has been used to finance
acquisitions (£1.3 million on NIKA and £0.4 million on the earnout relating to
the 2005 acquisition of MicReD). There was a positive cash flow from operations
in the period.
In order to compare like-with-like, the comparisons made below with the same
period last year are all at constant rates of exchange and are without the
contribution from NIKA.
We outlined our intention a year ago to increase sales productivity in Europe
and this is on track. Asia-Pacific meanwhile continues to be a good source of
growth and during this period revenues from China were particularly strong.
European turnover grew by 26% and turnover in Asia-Pacific grew by 35%.
Revenues from the US were down by 7%. As we stated in the Pre-Close Trading
Update release on 13 July 2007, we have found the market in the US to be weaker
this year and there has been a noticeable holding back by our customers on
making investment decisions.
By product, revenue from our electronics thermal line of business grew by 7%
(2006: 10%), FLOVENT by 19% (2006: 6%) and the electromagnetics line of business
by 13% (2005: 4%). MicReD contributed £240,000 to first half turnover (2005:
£128,000).
NIKA and EFD
The number of new seats of EFD software installed in the first half of 2007
increased by 85% compared to the same period last year. The majority of these
were in Germany and Japan, where the product was introduced some time ago. The
number of new seats in Germany grew by 75% and there was a 50% increase in the
number of new seats in Japan. In these regions, we saw orders from new customers
including ZF, Rowenta, Mitsubishi and Panasonic and growth from existing
customer including Toyota and Siemens. Sales elsewhere included Schlumberger,
Taylor Made Marine, Bonas and Swegon in Europe and Harman Becker and Alpha
Technologies Inc. in the USA.
We have made a significant investment in marketing and sales for our EFD product
range within new markets, especially the US. However it will take time to
penetrate these markets, in part because of the slow-down in the US, and as a
result, sales are below our ambitious plans. We now have sales resources in
place to sell the EFD product line in the UK, US and Germany as well as through
distributors, for example in Japan. The scope for the product is considerable
and we plan to invest additional resources in these and other territories as
sales build up.
In October we will make the first release of a module of the EFD product
focussing on electronics. This is a significant step forward and will allow some
of our FLOTHERM customer base to benefit from the EFD features.
The consideration for NIKA included an earnout element that was dependent on the
total group after tax profit for 2007. As we have said above, the associated
revenues from the acquisition are taking longer than expected to build up, and
therefore it is not expected that any of the earnout will be paid.
Outlook
Experience over the first year since the acquisition of NIKA has confirmed the
Board's view that it was a very good strategic development for Flomerics. The
Company's range of world-leading products has been broadened and enhanced by the
merger. As a result, the Board sees great potential for the Company to grow
strongly from this foundation. We are confident that in due course this will
bring returns to shareholders that will justify the dilution arising from the
acquisition.
Forecasting for the EFD product line in new territories remains difficult and we
had to scale back our short term expectations earlier this year. However the
Directors believe that there are good prospects for the Company to achieve
growth in revenue and adjusted profit in this year's results and for investments
in the EFD sales channels to bring significant benefits next year.
Consolidated Income Statement (Unaudited)
For the six months ended 30 June 2007
Six month Six month
period ended period ended Year ended
30 June 30 June 31 December
2007 2006 2006
Unaudited Unaudited Unaudited
Note £'000 £'000 £'000
Continuing operations:
Revenue 2 6,952 5,677 14,221
Cost of sales (188) (159) (550)
Gross profit 6,764 5,518 13,671
Administrative expenses (7,607) (5,418) (12,815)
Other operating income 30 30 61
Operating (loss)/profit (813) 130 917
Investment revenues 24 54 101
Finance costs (16) (46) (164)
(Loss)/profit before taxation (805) 138 854
Tax credit 3 42 79 78
(Loss)/profit for the period attributable (763) 217 932
to equity holders of the parent
(Loss)/earnings per share (pence): 5
Basic (3.57) 1.45 5.16
Diluted (3.31) 1.38 4.06
The comparatives for the periods ended 30 June 2006 and 31 December 2006 have
been restated as described in the transition to IFRS section.
Consolidated Balance Sheet (Unaudited)
At 30 June 2007
30 June 30 June 31 December
2007 2006 2006
Unaudited Unaudited Unaudited
£'000 £'000 £'000
Non-current assets
Investment property 1,185 1,195 1,189
Property, plant and equipment 555 424 520
Other intangible assets 3,941 214 4,141
Goodwill 7,259 1,353 7,266
Deferred tax asset 531 517 573
13,471 3,703 13,689
Current assets
Inventories 33 51 33
Trade and other receivables 4,715 3,671 5,467
Cash and cash equivalents 1,640 3,976 2,339
6,388 7,698 7,839
Total assets 19,859 11,401 21,528
Current liabilities
Trade and other payables (4,515) (3,876) (5,217)
Current tax liabilities - - (14)
Bank overdrafts and loans (71) (60) (71)
Derivative financial instruments - (12) -
(4,586) (3,948) (5,302)
Non-current liabilities
Bank loans (270) (350) (305)
Deferred tax liability (865) - (950)
(1,135) (350) (1,255)
Total liabilities (5,721) (4,298) (6,557)
Net assets 14,138 7,103 14,971
Equity
Share capital 216 150 213
Shares to be issued 1,112 108 1,112
Share premium reserve 1,920 1,727 1,735
Merger reserve 7,185 892 7,185
Retained earnings 4,037 4,250 5,028
Currency translations (332) (24) (302)
Total equity 14,138 7,103 14,971
The comparatives for the periods ended 30 June 2006 and 31 December 2006 have
been restated as described in the transition to IFRS section.
Consolidated Cash Flow Statement (Unaudited)
For the six months ended 30 June 2007
Six month Six month
period ended period ended Year ended
30 June 30 June 31 December
2007 2006 2006
Unaudited Unaudited Unaudited
£'000 £'000 £'000
Cash flows from existing operating activities:
(Loss)/profit for the period (763) 217 932
Depreciation of property, plant and equipment 207 166 252
Amortisation of other intangible assets 363 53 579
Loss on disposal of property, plant and equipment - - 2
Investment revenues (24) (54) (101)
Finance costs 16 46 164
Income tax (42) (79) (78)
Share-based payment expense 75 49 97
Operating cash (outflows)/inflows before movements in working (168) 398 1,847
capital
Changes in operating assets and liabilities:
Receivables 753 282 (1,081)
Inventory - 8 30
Payables (292) (325) 89
Cash generated by operations 293 363 885
Income taxes paid (14) (30) (176)
Finance costs (16) (46) (164)
Net cash from operating activities 263 287 545
Cash flows from investing activities:
Interest received 24 54 101
Proceeds on disposal of property, plant and equipment - - 5
Purchases of property, plant and equipment (227) (194) (512)
Purchase of intangibles (179) - (77)
Acquisition of subsidiary (net of cash acquired) (259) - (1,418)
Net cash used in investing activities (641) (140) (1,901)
Cash flows from financing activities:
Proceeds from issue of shares (net of issue costs) 38 - -
Dividends paid (295) (195) (195)
Repayment of loans (35) (34) (68)
Net cash used in financing activities (292) (229) (263)
Net decrease in cash and cash equivalents (670) (82) (1,619)
Cash and cash equivalents at the start of the year 2,339 4,081 4,081
Effect of foreign exchange rate changes (29) (23) (123)
Cash and cash equivalents at end of year 1,640 3,976 2,339
Notes to the Unaudited Interim Report - 2007
1. Basis of presentation
The accompanying unaudited interim consolidated financial statements of
Flomerics Group plc ("the Group") have been prepared in conformity with
recognition and measurement principles required by International Financial
Reporting Standards ("IFRS"). From the year ending 31 December 2007 the Group
will prepare its consolidated financial statements in accordance with IFRS as
adopted by the European Union in order that the Group financial statements
comply with the AIM rules. Previously, the group reported under UK Generally
Accepted Accounting Practice ("UK GAAP"). The Group's date of transition to
IFRS is 1 January 2006, which is the beginning of the comparative period for the
2006 financial year.
Reconciliations have been produced to show the changes made to the statements
previously reported under UK GAAP in arriving at the equivalent statements under
IFRS. These reconciliations and the resulting restated comparatives have not
been audited. UK GAAP accounts for the year ended 31 December 2006 have been
filed with the Registrar of Companies and received an unqualified audit report
that did not include references to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and did not contain
statements under Section 237(2) or (3) of the Companies Act 1985.
2. Segmental information
All of the Group's results and revenues are derived from its sole activity, that
of providing virtual prototyping solutions to engineers and designers.
Accordingly, the Group maintains only one reportable business segment, as is
reflected in the reporting in these interim financial statements.
Geographical segments
The Group's operations are located in United States of America, Europe and Asia
Pacific. The following table provides an analysis of the Group's sales by
geographical market, irrespective of the origins of the service.
Six month Six month Year ended
period ended period ended 31 December
30 June 30 June 2006
2007 2006 £'000
£'000 £'000
United States of America 2,446 2,796 5,563
Europe 3,014 1,730 5,946
Asia Pacific 1,492 1,151 2,712
6,952 5,677 14,221
3. Income taxes
As the Group made a loss in the period a current tax charge of £nil has been
assumed. The credit in the period arises from movements in deferred tax.
4. Dividends
Six month Six month Year ended
period ended period ended 31 December
30 June 30 June 2006
2007 2006 £'000
£'000 £'000
Final dividend for the prior year recognised in the period 295 195 195
of 1.4p per share (2006 - 1.3p)
5. (Loss)/earnings per share (pence)
Six month Six month Year ended
period ended period ended 31 December
30 June 30 June 2007
2007 2007
(Loss)/earnings per share (pence)
Basic (3.57) 1.45 5.16
Diluted (3.31) 1.38 4.06
The calculation of the basic and diluted (loss)/earnings per share is based on the following data:
£'000 £'000 £'000
(Loss)/earnings
(Loss)/earnings for the purposes of basic and diluted (763) 217 932
(loss)/earnings per share being net loss/(profit)
attributable to equity holders of the parent
Number Number Number
Number of shares
Weighted average number of ordinary shares for the 21,388 14,932 18,063
purposes of basic (loss)/earnings per share
Effect of dilutive potential ordinary shares
Share options 1,662 782 4,905
Weighted average number of ordinary shares for the 23,050 15,714 22,968
purposes of diluted (loss)/earnings per share
The earnings per share calculation assumes that there are no further shares
issued to the former shareholders of NIKA under the earnout arrangement.
6. Adjusted (loss)/profit
The adjusted ( loss)/profit for the period and the prior year period is arrived
at as follows:
Six month Six month
period ended period ended
30 June 30 June
2007 2006
£'000 £'000
(Loss)/profit before tax (805) 138
Share based payment 75 49
Amortisation of intangibles 337 -
Capitalisation of reseach and development, net of (152) 53
amortisation
Adjusted (loss) / profit (545) 240
Accounting policies
Basis of preparation
The preliminary balance sheets and income statements shown in the Transition to
IFRS section have been prepared on the basis of IFRS expected to be in issue at
31 December 2007. The preliminary IFRS financial statements will form the basis
of the comparative information in the first IFRS accounts and have been prepared
on the basis of IFRS expected to be in issue at 31 December 2007 but are still
subject to change. We will update the restated information for any such change
in the 31 December 2007 financial statements.
Whilst the financial information included in the transition to IFRS section has
been prepared in accordance with IFRS's as adopted for use by the European
Union, it does not constitute full IFRS compliant financial statements. In
particular, the information contained in the transition to IFRS section
indicates the quantitative adjustments that are expected to arise as a result of
the transition to IFRS, but does not include all the primary statements that
would be required under IFRS, nor does it include the disclosures that are
required for IFRS compliant financial statements.
The Group will comply with all these requirements when it prepares its first
annual IFRS statements covering the year ending 31 December 2007.
The preliminary IFRS financial statements have been prepared on an historical
cost basis, except for the measurement of balances at fair value as disclosed in
the accounting policies below.
Interim financial statements
As permitted, the Group has not adopted IAS 34 "Interim Financial Reporting".
Therefore the disclosures presented do not comply in full with the requirements
of that standard.
First time adoption
The Group has adopted IFRS from 1 January 2006 ('the date of transition').
Please refer to the transition to IFRS section for details on exemption balances
on the transition.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) made up to
31 December each year. Control is achieved where the Company has the power to
govern the financial and operating policies of an investee entity so as to
obtain benefits from its activities. The Group income statement includes the
results of subsidiaries acquired or disposed of during the year from the
effective date of acquisition or up to the effective date of disposal, as
appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
Business combinations
The acquisition of subsidiaries, or trade and assets, is accounted for using the
purchase method. The cost of the acquisition is measured at the aggregate of the
fair values, at the date of exchange, of assets given, liabilities incurred or
assumed, and equity instruments issued, or to be issued, by the Group in
exchange for control of the acquiree, plus any costs directly attributable to
the business combination. The acquiree's identifiable assets, liabilities and
contingent liabilities that meet the conditions for recognition under IFRS 3 are
recognised at their fair value at the acquisition date, except for non-current
assets (or disposal groups) that are classified as held for sale in accordance
with IFRS 5 "Non Current Assets Held for Sale and Discontinued Operations",
which are recognised and measured at fair value less costs to sell.
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. If, after reassessment, the Group's
interest in the net fair value of the acquiree's identifiable assets,
liabilities and contingent liabilities exceeds the cost of the business
combination, the excess is recognised immediately in profit or loss.
The Group has taken the exemption conferred in IFRS 1, "First-time Adoption of
International Financial Reporting Standards", not to restate business
combinations prior to the transition date of 1 January 2006 under IFRS 3.
Property, plant and equipment
Property, plant and equipment is stated at cost or deemed cost less accumulated
depreciation and any impairment in value.
Depreciation
Depreciation is provided on all property, plant and equipment, other than
freehold land, at rates calculated to write off the cost, less estimated
residual value based on prices prevailing at the date of acquisition, of each
asset evenly over its expected useful life, as follows:
Computer hardware 20-33% per annum
Fixtures and fittings 20-33% per annum
The carrying values of property, plant and equipment are reviewed for impairment
if events or changes in circumstances indicate the carrying value may not be
recoverable.
The asset's residual values, useful lives and methods are reviewed, and adjusted
if appropriate, at each financial year end.
Investment property
Investment property, which is properly held to earn rentals is stated at its
historic cost as the Group elected, under the transitional arrangements
available under IFRS 1, to use the previous carrying value under UK GAAP as
deemed cost in transition. The investment property is depreciated on a
straightline basis of 2% per annum, however the land on which it is situated is
not depreciated.
Goodwill
Goodwill represents the excess of the cost of acquisition over the Group's
interest in the fair value of the identifiable assets and liabilities of a
subsidiary, or acquired sole trade business at the date of acquisition. Goodwill
is initially recognised as an asset at cost and is subsequently measured at cost
less any accumulated impairment losses. Goodwill which is recognised as an asset
is reviewed for impairment at least annually. Any impairment is recognised
immediately in the Group income statement and is not subsequently reversed.
For the purpose of impairment testing, goodwill is allocated to each of the
Group's cash-generating units expected to benefit from the synergies of the
combination. Cash-generating units to which goodwill has been allocated are
tested for impairment annually, or more frequently when there is an indication
that the unit may be impaired. If the recoverable amount of the cash-generating
unit is less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the
unit and then to the other assets of the unit pro-rata on the basis of the
carrying amount of each asset in the unit. An impairment loss recognised for
goodwill is not reversed in a subsequent period.
On disposal of a subsidiary the attributable amount of goodwill is included in
the determination of the profit or loss on disposal.
Goodwill arising on acquisitions before the date of transition to IFRS has been
retained at the previous UK GAAP amounts subject to being tested for impairment
at that date and subsequently as required by the provisions of IAS 36 "
impairment of assets".
Intangible assets
Intangible assets with a finite useful life are carried at cost less
amortisation and any impairment losses. Intangible assets represent items which
have been separately identified under IFRS 3 arising in business combinations,
or meet the recognition criteria of IAS 38, "Intangible Assets".
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any). Where the asset does not generate cash
flows that are independent from other assets, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to
be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised in the income statement as an expense immediately, unless the
relevant asset is carried at a revalued amount, in which case the impairment
loss is treated as a revaluation decrease.
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 revalued amount, in which case the reversal of the impairment loss is
treated as a revaluation increase.
Amortisation of intangible assets acquired in a business combination is
calculated over the following periods on a straight line basis:
Customer relationships - 10% per annum
Contract based assets - 50% per annum
Completed technology - over a useful life of 7 years
Non-competition agreement - 25% per annum
Amortisation of other intangible assets (computer software) is calculated using
the straight-line method to allocate the cost of the asset less its assessed
realisable value over its estimated useful life, which equates to 33% to 50% per
annum.
Internally-generated intangible assets - research and development expenditure
Expenditure on research activities is recognised as an expense in the period in
which it is incurred.
Any internally-generated intangible asset arising from the Group's development
projects are recognised only if all of the following conditions are met:
• an asset is created that can be identified;
• it is possible that the asset created will generate future economic
benefits; and
• the development cost of the asset can be measured reliably.
Internally-generated intangible assets are amortised on a straight-line basis
over their useful lives of three years. Where no internally-generated
intangible asset can be recognised, development expenditure is recognised as an
expense in the period in which it is incurred.
Financial instruments
Financial assets and financial liabilities are recognised on the Group's balance
sheet at fair value when the Group becomes a party to the contractual provisions
of the instrument.
Trade receivables
Trade receivables represent amounts due from customers in the normal course of
business. All other amounts which are not interest bearing are stated at their
nominal value as reduced by appropriate allowances for estimated irrecoverable
amounts, which are charged to the income statement.
Cash and cash equivalents
Cash and cash equivalents include cash at hand and deposits held at call with
banks with original maturities of three months or less.
Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument is
any contract that evidences a residual interest in the assets of the Group after
deducting all of its liabilities.
Bank Borrowings
Interest-bearing bank loans and overdrafts are recorded at fair value, net of
direct issue costs. Such bank borrowings are subsequently measured at amortised
cost using the effective interest rate method, which ensures that any interest
expense over the period to repayment is at a constant rate on the balance of the
liability carried in the balance sheet. Finance charges are accounted for on an
accruals basis in the income statement using the effective interest rate method
and are added to the carrying amount of the instrument to the extent that they
are not settled in the period in which they arise.
Trade payables
Trade payables are initially measured at fair value, and are subsequently
measured at amortised cost, using the effective interest rate method.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received,
net of direct issue costs.
Derivative financial instruments
The Group's activities expose it primarily to the financial risks of changes in
foreign exchange rates. The Group occasionally uses forward exchange contracts
to hedge these exposures. The Group does not use derivative financial
instruments for speculative purposes.
The Group has elected not to adopt the hedge accounting provisions of IAS 39.
Derivative financial instruments are initially measured at fair value on the
date that the contract is entered into and subsequently remeasured to fair value
at each reporting date. The gains and losses on remeasurement are taken to the
income statement and reported in administrative expenses.
Dividends
Dividends are provided for in the period in which they become a binding
liability on the Group.
Inventories
Inventories are stated at the lower of cost and net realisable value. For
inventories acquired for retail sale the cost represents the purchase price plus
overheads directly related to bringing inventory to its present location and
condition and is measured on a first in first out basis. Net realisable value
represents the estimated selling price less all estimated costs of completion
and costs to be incurred in marketing, selling and distribution.
Where necessary allowance is made for obsolete, slow moving and damaged
inventory.
Employee share incentive plans
The Group issues equity-settled share-based payments to certain employees
(including directors). These payments are measured at fair value at the date of
grant by use of the Black-Scholes pricing model. This fair value cost of
equity-settled awards is recognised on a straight-line basis over the vesting
period, based on the Group's estimate of shares that will eventually vest and
adjusted for the effect of any non market-based vesting conditions. 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 behavioural
considerations. A corresponding credit is recorded in equity in the share option
account.
No cost is recognised for awards that do not ultimately vest.
Leases
Leases taken by the Group are assessed individually as to whether they are
finance leases or operating leases. Leases are classified as finance leases
whenever the terms of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as operating leases.
Leases where the lessor retains substantially all the risks and benefits of
ownership of the asset are classified as operating leases. Operating lease
rental payments are recognised as an expense in the income statement on a
straight-line basis over the lease term. The benefit of lease incentives is
spread over the term of the lease.
The Group currently has no material finance leases.
Taxation
The tax expense represents the sum of the current tax and deferred tax charges.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from the initial recognition of goodwill or from the initial
recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the tax profit nor the
accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Share capital and share premium
There is one class of shares. When new shares are issued, they are recorded in
share capital at their par value. The excess of the issue price over the par
value is recorded in the share premium reserve.
Incremental external costs directly attributable to the issue of new shares
(other than in connection with a business combination) are recorded in equity as
a deduction, net of tax, to the share premium reserve.
Revenue recognition
Revenue represents the amounts receivable, net of sales taxes, on the provision
of the Group's software, maintenance, consultancy, and other services such as
training and hardware. When a sale is made to a customer of the Group's
software, the price normally includes the provision of maintenance (for a
perpetual licence this is only for the first year). The maintenance element is
deferred and is recognised over the period that the maintenance is provided.
Appropriate amounts attributable to maintenance are deferred for each type of
licence.
The licence element of the sale is recognised as income when the following
conditions have been satisfied:
1) The software has been provided to the customer in a form that
enables the customer to utilise it;
2) There is evidence of a contractual relationship between the
customer and the Group relating to the revenue in question;
3) The ongoing obligations of the Group to the customer, aside from
the maintenance, are minimal; and
4) The amount payable by the customer is determinable and there is
a reasonable expectation of payment.
Revenue on the sale of hardware products is recognised when the risks and
rewards of ownership have passed to the customer and the Group's work is
substantially complete, which is usually upon delivery to the customer or his
agent.
Retirement benefit costs
The Group operates a defined contribution pension scheme. The amount charged to
the income statement in respect of pension costs and other post-retirement
benefits is the contributions payable in the year.
Differences between contributions payable in the year and contributions actually
paid are shown as either accruals or prepayments in the balance sheet.
Operating profit
Operating profit is stated before investment income and finance costs.
Foreign exchange
The individual financial statements of each group company are presented in the
currency of the primary economic environment in which it operates (its
functional currency). For the purpose of the consolidated financial statements,
the result and the financial position of each group company are expressed in
pounds sterling, which is the functional currency of the parent Company, and the
presentation currency for the consolidated financial statements.
Exchange differences arising on the settlement of monetary items, and on the
retranslation of monetary items, are included in profit or loss for the period.
Exchange differences arising on the retranslation of non-monetary items carried
at fair value are included in profit or loss for the period except for
differences arising on the retranslation of non-monetary items in respect of
which gains and losses are recognised directly in equity. For such non-monetary
items, any exchange component of that gain or loss is also recognised directly
in equity.
For the purpose of presenting consolidated financial statements, the assets and
liabilities of the group's foreign operations are translated at exchange rates
prevailing on the balance sheet date. Income and expense items are translated
at the average exchange rates for the period, unless exchange rates fluctuate
significantly during that period, in which case the exchange rates at the date
of transactions are used. Exchange differences arising, if any, are classified
as equity and transferred to the group's translation reserve. Such translation
differences are recognised as income or an expenses in the period in which the
operations is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate. The group has elected to treat goodwill and
fair value adjustments arising on acquisitions before the date of transition to
IFRS as sterling denominated assets and liabilities.
Transition to IFRS
The following pages set out reconciliations of the UK GAAP balance sheet at 1
January 2006, 30 June 2006 and 31 December 2006 and the income statements for
the periods 30 June 2006 and 31 December 2006.
The principal accounting policy changes from UK GAAP that have had an impact on
the balance sheet or income statement are set out as follows:
IFRS 1 First time adoption of IFRS
IFRS 1 permits a number of first time adoption exemptions and the Group has
elected to take those relating to business combinations, fair value or
revaluation as deemed cost and cumulative translation differences.
These are explained in more detail below:
Business combinations: The Group has elected not to apply IFRS 3, Business
Combinations, retrospectively to combinations that took place prior to the
transition date. Accordingly, the carrying value of goodwill recorded under UK
GAAP has been fixed at the date of transition as deemed cost and will no longer
be amortised.
Fair value or revaluations as deemed cost: The Group has elected to adopt the
cost model available under IAS 40, Investment Property. Accordingly, the net
book value of the property at the date of transition will be deemed as cost
under IFRS.
Cumulative translation differences: Under IAS 21, some translation differences
are required to be initially recognised as a separate component of equity that
is only recognised in the income statement on the disposal of that foreign
operation. The Group has elected not to comply with this requirement for
cumulative translation differences that existed at the date of transition and
accordingly, the cumulative translation differences for all foreign operations
are deemed to be zero at the date of transition. The group has also elected to
treat goodwill and fair value adjustments arising on acqusitions prior to 1
January 2006 as sterling denominated assets and liabilities.
IAS 12 Income Taxes
General
IAS 12 takes a balance sheet approach to deferred tax whereby deferred tax is
recognised in the balance sheet by applying the appropriate tax rate to the
temporary differences arising between the carrying value of the assets and
liabilities and their tax base. This contrasts with UK GAAP (FRS 19) which
considered timing differences arising in the profit and loss account.
Where the IFRS adjustments discussed in this document create a difference
between the carrying amount of an asset or liability and the related tax base,
and there are no initial recognition exemptions available under IAS 12, the
Group has recorded a deferred tax liability or asset as required. The following
table demonstrates how the asset and liabilities have arisen:
Deferred tax
asset/(liability)
£'000
At date of transition:
IAS 38 - capitalisation of research and development (40)
Asset arising on fixed asset timing differences 428
Asset arising on short term timing differences 18
Asset arising on share based payment 14
Net deferred tax asset at 1 January 2006 420
At 30 June 2006:
IAS 38 - capitalisation of research and development (24)
Asset arising on fixed asset timing differences 501
Asset arising on share based payment 20
Asset arising on short term timing differences 20
Net deferred tax asset at 30 June 2006 517
At 31 December 2006:
IAS 38 - capitalisation of research and development (31)
Asset arising on fixed asset timing differences 574
Asset arising on short term timing differences 23
Asset arising on share based payment 7
Net deferred tax asset at 31 December 2006 573
Liability arising on NIKA intangibles at acquisition at 31 (950)
December 2006
Deferred tax on business combinations
IAS 12 requires that deferred tax is provided in full on differences between the
carrying value of assets and liabilities acquired in a business combination and
the related tax base, regardless of whether the business combination is
accounted for under IFRS 3. In the specific case of business combinations, the
initial recognition exemption available under IAS 12 not to recognise deferred
tax on transactions which at the time of the transaction do not affect
accounting profit or taxable profit is not available.
The Group acquired NIKA GmbH (NIKA), in July 2006 in a transaction which was a
business combination as defined by IFRS 3, "Business combinations". NIKA had at
that date certain assets which did not qualify for tax deduction (non qualifying
assets). Under UK GAAP these non qualifying assets do not result in a timing
difference on which deferred tax is provided. Additionally, under IAS 12, in the
normal course of events, the initial recognition exemption referred to above is
available on these non qualifying assets.
Accordingly, the Group has provided for deferred tax on the full difference
between the carrying amount of these assets acquired by the Group in July 2006
and their tax base of £nil. The impact of this change for the Group was an
increase to goodwill on acqusition of £1,051,000 and a corresponding deferred
tax provision of £1,051,000. There was no impact on the income statement as a
result of this change. This deferred tax provision will reduce as the carrying
amount of the assets is amortised and as at 30 June 2007 the deferred tax
liability was £865,000.
IAS 19 Employee Benefits
Holiday pay accrual
IAS 19 requires an accrual to be made for earned but unpaid holiday pay. The
Group's holiday year runs from January to December and holiday carryover is
permitted. Accordingly, the requirement to record a holiday pay accrual has
impacted negatively, the opening balance sheet as at 1 January 2006 by £79,000,
the 30 June 2006 balance sheet by £94,000 and the 31 December 2006 balance sheet
by £97,000, with the income statements for each period incurring a charge by the
corresponding movement.
Furthermore, an additional fair value adjustment of £68,000 in respect of
holiday pay accruals was made as part of the NIKA acquisition and this has
increased goodwill by an equal amount.
IAS 21 The effect of changes in foreign exchange
Under IAS 21, it is necessary to present foreign exchange differences arising
from the retranslation of overseas subsidiaries into the presentation currency
of the group from the transition date as a separate reserve in equity.
Accordingly, such movements have been reclassified for the periods ended 30 June
2006 and 31 December 2006.
Also, goodwill and fair value adjustments arising on acqusitions of a foreign
entity are treated as assets and liabilities of that foreign entity and
translated at the closing rate. As a result of this change, net assets at 31
December 2006 have been reduced by £162,000.
IAS 38 Intangible Assets
Capitalised software
Under UK GAAP, all capitalised software development costs are included within
tangible fixed assets. IAS 38 requires that where such costs are not an integral
part of the associated hardware, they should be classified as intangible assets.
Accordingly, certain items of property, plant and equipment have been
reclassified to intangible assets at each reference date where they are items of
software that meet the recognition criteria of IAS 38.
There is no net impact on the income statement as a result of this
reclassification, however, there has been a reclassification of the amounts
recorded as depreciation on these assets to amortisation charges. The impact on
the balance sheets at 1 January 2006 and 30 June 2006 has been an increase in
Intangible Assets and a matching decrease in Property, plant and equipment of
£135,000 and £135,000 respectively. Software had already been reclassified as an
intangible asset in the 31 December 2006 financial statements and hence no
adjustment has arisen.
Intangible assets amortisation
The Group has recognised additional intangible assets under IFRS 3 "Business
Combinations", as discussed below. IAS 38 requires that amortisation is
provided where an intangible asset has a finite life. The adjustment arising
from this is discussed below in IFRS 3 "Business Combinations".
Research and development expenditure
Under UK GAAP, the Group took the option available under SSAP 13 to write off
all expenditure as incurred. Under IAS 38 it is obligatory to capitalise when
all of the criteria specified by the standard are met. Following a review of the
development projects being conducted by the Group, the capitalisation of the
qualifying expenditure has resulted in an increase in intangible assets at 1
January 2006 of £132,000, £79,000 at 30 June 2006 and £103,000 at 31 December
2006 with a corresponding reduction of administrative expenses in the income
statement. As these development costs are now being capitalised a reduction in
profits has been caused by the associated amortisation charge.
IAS 39 Financial Instruments: Recognition and Measurement
Forward exchange contract fair value
IAS 39 requires all derivatives, including forward exchange contracts, to be
initially recognised and subsequently re-measured at fair value. The Group had
open forward foreign exchange contracts in place at 1 January 2006 and 30 June
2006. The Group had not adopted the hedging provisions of IAS 39 at this time
and accordingly, changes in fair value are taken to the income statement in the
period in which they arise.
The impact of this change for the Group has been an increase in administrative
costs of £12,000 in the six months to 30 June 2006 together with a corresponding
creditor on the balance sheet, and a reduction in net assets of £29,000 in the
opening balance sheet at 1 January 2006.
IAS 40 Investment Property
On reviewing the Group's UK GAAP accounting policies against IFRS, it was noted
that the characteristics of a building owned by the Group meant it would more
appropriately be classified as an investment property. The Group have chosen to
adopt the cost measurement accounting policy as allowed by IAS 40 as a result.
This new policy has had no impact in the income statement but does cause a
reclassification in the balance sheet of £1,201,000 within non-current assets;
the amounts for subsequent periods is reduced by the depreciation charge for
that period.
IFRS 3 Business Combinations
Business combinations: Reversal of goodwill amortisation
Under UK GAAP, the Company recognised goodwill as the difference between the
fair value of assets and liabilities acquired and the fair value of
consideration paid on all acquisitions of trade and assets and subsidiary
companies. Goodwill was amortised over its useful economic life, generally being
20 years.
IFRS 3 prohibits the amortisation of goodwill. The standard requires goodwill
to be carried at cost with impairment reviews both annually and when there are
indications that the carrying value may not be recoverable.
Accordingly, amortisation charged in the financial year ended 31 December 2006
has been reversed, increasing operating profit by £644,000 for the year to 31
December 2006 and by £98,000 for the six months to 30 June 2006. Additionally,
the accumulated amortisation at the transition date has been eliminated against
the cost of goodwill. Further adjustments have been made to the goodwill balance
resulting from the application of IFRS 3 to business combinations after the
transition date as detailed below.
Goodwill which is recognised as an asset is reviewed for impairment at least
annually. Any impairment is recognised immediately in the Group income statement
and is not subsequently reversed. In accordance with IFRS 1 and IAS 36, an
impairment review on all assets was duly carried out at the transition date and
subsequently in December 2006 and no impairment loss was identified.
Business combinations: Intangible assets
As accorded by the transitional arrangements of IFRS 1, the Group has chosen to
apply IFRS 3 prospectively from the date of transition (1 January 2006) and not
to restate previous business combinations.
For qualifying business combinations, goodwill under IFRS 3 represents the
excess of consideration over the fair values of acquired assets (including any
separately identifiable and measurable intangible assets), liabilities and
contingent liabilities. As noted above, the Group has not applied IFRS 3 to
business combinations prior to the transition date of 1 January 2006. In the
period subsequent to 1 January 2006, the Group acquired NIKA in July 2006. The
Group has assessed this business combination under IFRS 3 and identified
intangible assets relating to recurring customer relationships, a
non-competition agreement, a contract based asset and completed technology which
have been reclassified from goodwill to intangible assets.
As required under IAS 38, these intangible assets are amortised over their
finite lives (considered to be between 4 and 10 years) and subject to impairment
reviews annually and before the end of the accounting period in which they were
acquired.
The impact of this change for the Group has been a reduction to goodwill of
£4,205,000 and a corresponding increase in other intangible assets in the year
to December 2006. The resulting amortisation charge arising on this
reclassification is £338,000 with a corresponding reduction in intangible
assets.
Unaudited Reconciliations on transition from UK GAAP to IFRS
The balance sheet reconciliations at 1 January 2006 (date of transition to IFRS)
and at 31 December 2006 (date of last UK GAAP financial statements) and the
reconciliation of profit for 2006, as required by IFRS 1 are shown below:
1. Unaudited balance sheet reconciliation at 1 January 2006
UK GAAP IAS 12 IAS 19 IAS 38 IAS 38 IAS 39 IAS40 IFRS
(IFRS Income Holiday Reclassi- Capitali- Loss on Reclassi-
format) taxes pay fication of sation of forward fication of
accrual software development exchange investment
costs contract properties
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Non-current assets
Goodwill 1,353 - - - - - - 1,353
Other intangible assets - - - 135 132 - - 267
Property, plant and equipment 1,726 - - (135) - - (1,201) 390
Investment property - - - - - - 1,201 1,201
Deferred tax asset - 420 - - - - - 420
3,079 420 - - 132 - - 3,631
Current assets
Inventories 59 - - - - - - 59
Trade and other receivables 3,953 - - - - - - 3,953
Cash and cash equivalents 4,081 - - - - - - 4,081
8,093 - - - - - - 8,093
Total assets 11,172 420 - - 132 - - 11,724
Current liabilities
Trade and other payables (4,289) - (79) - - - - (4,368)
Current tax liability (30) - - - - - - (30)
Bank overdraft and loan (67) - - - - - - (67)
Derivative financial liability - - - - - (29) - (29)
(4,386) - (79) - - (29) - (4,494)
Non-current liabilities
Bank loans (377) - - - - - - (377)
Total liabilities (4,763) - (79) - - (29) - (4,871)
Net assets 6,409 420 (79) - 132 (29) - 6,853
UK GAAP IAS 12 IAS 19 IAS 38 IAS 38 IAS 39 IAS40 IFRS
(IFRS Income Holiday Reclassi- Capitali- Loss on Reclassi-
format) taxes pay fication of sation of forward fication of
accrual software development exchange investment
costs contract properties
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Equity
Share capital 148 - - - - - - 148
Shares to be issued 33 - - - - - - 33
Share premium reserve 1,602 - - - - - - 1,602
Merger reserve 892 - - - - - - 892
Retained earnings 3,734 420 (79) - 132 (29) - 4,178
Currency translation - - - - - - - -
6,409 420 (79) - 132 (29) - 6,853
2. Unaudited balance sheet reconciliation at 30 June 2006
IAS 12 IAS 19 IAS 21 IAS 38 IAS 38 IAS 39 IAS 40 IFRS 3 IFRS
UK GAAP Income Holiday Currency Reclassi- Capitali- Loss on Reconcili- Add
(IFRS taxes pay trans- fication sation forward ation back
format) accrual lation of of exchange of of
differ- software develop- contract invest- goodwill
ences ment ment amorti-
expendi- property sation
ture
net of
amorti-
sation
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Non-current
assets
Goodwill 1,255 - - - - - - - 98 1,353
Other
intangible
assets - - - - 135 79 - - - 214
Property, plant
and equipment 1,754 - - - (135) - - (1,195) - 424
Investment
property - - - - - - - 1,195 - 1,195
Deferred tax
asset - 517 - - - - - - - 517
3,009 517 - - - 79 - - 98 3,703
Current assets
Inventories 51 - - - - - - - - 51
Trade and other
receivables 3,671 - - - - - - - - 3,671
Cash and cash
equivalents 3,976 - - - - - - - - 3,976
7,698 - - - - - - - - 7,698
Total assets 10,707 517 - - - 79 - - 98 11,401
Current
liabilities
Trade and other
payables (3,782) - (94) - - - - - - (3,876)
Current tax
liability - - - - - - - - - -
Bank overdraft
and loan (60) - - - - - - - - (60)
Derivative
financial
liability - - - - - - (12) - - (12)
(3,842) - (94) - - - (12) - - (3,948)
Non-current
liabilities
Bank loans (350) - - - - - - - - (350)
Total
liabilities (4,192) - (94) - - - (12) - - (4,298)
Net assets 6,515 517 (94) - - 79 (12) - 98 7,103
IAS 12 IAS 19 IAS 21 IAS 38 IAS 38 IAS 39 IAS 40 IFRS 3 IFRS
UK GAAP Income Holiday Currency Reclassi- Capitali- Loss on Reconcili- Add
(IFRS taxes pay trans- fication sation forward ation back
format) accrual lation of of exchange of of
differ- software develop- contract invest- goodwill
ence ment ment amorti-
expendi- property sation
ture
net of
amorti-
sation
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Equity
Share capital 150 - - - - - - - - 150
Shares to be
issued on
account 108 - - - - - - - - 108
Share premium
reserve 1,727 - - - - - - - - 1,727
Merger reserve 892 - - - - - - - - 892
Retained
earnings 3,638 517 (94) 24 - 79 (12) - 98 4,250
Currency
translation - - - (24) - - - - - (24)
6,515 517 (94) - - 79 (12) - 98 7,103
3. Unaudited balance sheet reconciliation at 31 December 2006
IAS 12 IAS 19 IAS 21 IAS 38 IAS 38 IAS 40 IFRS3 IFRS3 IFRS
UK GAAP Income Holiday Currency Capitali- Amorti- Reclassi- Reclassi- Add
(IFRS Taxes pay trans- of sation fication fication back
format) accrual lation develop- of other of of of
differ- ment intan- invest- intan- good-
ence costs, net gibles ment gibles will
of identi- property identi- amorti-
amorti- fied fied sation
sation in NIKA in NIKA
acquisi- acquisi-
tion tion
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Non-current
assets
Goodwill 9,807 1,051 68 (99) - - - (4,205) 644 7,266
Other
intangible
assets 234 - - (63) 103 (338) - 4,205 - 4,141
Property,
plant and
equipment 1,709 - - - - - (1,189) - - 520
Investment
property - - - - - - 1,189 - - 1,189
Deferred tax
asset - 573 - - - - - - - 573
11,750 1,624 68 (162) 103 (338) - - 644 13,689
Current
assets
Inventories 33 - - - - - - 33
Trade and
other
receivables 5,467 - - - - - - - - 5,467
Cash and cash
equivalents 2,339 - - - - - - - - 2,339
7,839 - - - - - - - - 7,839
Total assets 19,589 1,624 68 (162) 103 (338) - - 644 21,528
Current
liabilities
Trade and
other
payables (5,120) - (97) - - - - - - (5,217)
Current tax
liability (14) - - - - - - - - (14)
Bank
overdraft
and loan (71) - - - - - - - - (71)
(5,205) - (97) - - - - - - (5,302)
Non-current
liabilities
Bank loans (305) - - - - - - - - (305)
Deferred tax
liability - (950) - - - - - - - (950)
(305) (950) - - - - - - - (1,255)
Total
liabilities (5,510) (950) (97) - - - - - - (6,557)
Net assets 14,079 674 (29) (162) 103 (338) - - 644 14,971
IAS 12 IAS 19 IAS 21 IAS 38 IAS 38 IAS 40 IFRS3 IFRS3 IFRS
UK GAAP Income Holiday Currency Capitali- Amorti- Reclassi- Reclassi- Add
(IFRS Taxes pay trans- of sation fication fication back
format) accrual lation develop- of other of of of
differ- ment intan- invest- intan- good-
ence costs, net gibles ment gibles will
of identi- property identi- amorti-
amorti- fied fied sation
sation in NIKA in NIKA
acquisi- acquisi-
tion tion
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Equity
Share capital 213 - - - - - - - - 213
Shares to be
issued 1,112 - - - - - - - - 1,112
Share premium
reserve 1,735 - - - - - - - - 1,735
Merger reserve 7,185 - - - - - - - - 7,185
Retained
earnings 3,834 674 (29) 140 103 (338) - - 644 5,028
Currency
translation - - - (302) - - - - - (302)
14,079 674 (29) (162) 103 (338) - - 644 14,971
4. Unaudited income statement reconciliation for the six month period to
30 June 2006
UK GAAP IAS 12 IAS 19 IFRS 38 IAS 39 IFRS 3 IFRS
Income Holiday pay Amortisation Write back Write back
taxes accrual of of loss on of goodwill
development exchange amortisation
expenditure already
recognised
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Continuing operations
Revenue 5,677 - - - - - 5,677
Cost of sales (159) - - - - - (159)
Gross profit 5,518 - - - - - 5,518
Administrative expenses (5,465) - (15) (53) 17 98 (5,418)
Other operating income 30 - - - - - 30
Operating profit 83 - (15) (53) 17 98 130
Investment revenues 54 - - - - - 54
Finance costs (46) - - - - - (46)
Profit before tax 91 - (15) (53) 17 98 138
Tax (18) 97 - - - - 79
Profit for the period 73 97 (15) (53) 17 98 217
5. Unaudited income statement reconciliation for the year to 31 December 2006
UK GAAP IAS 12 IAS 19 IFRS 38 IAS 38 IAS 39 IFRS 3 Write IFRS
Add back back of
Income Holiday Capitalisation Amortisation of loss goodwill
taxes pay of development of on amortisation
accrual expenditure intangible exchange
net of fixed assets contract
amortisation
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Continuing operations
Revenue 14,221 - - - - - - 14,221
Cost of sales (550) - - - - - - (550)
Gross profit 13,671 - - - - - - 13,671
Administrative expenses (13,171) - 50 (29) (338) 29 644 (12,815)
Other operating income 61 - - - - - 61
Operating profit 561 - 50 (29) (338) 29 644 917
Investment revenues 101 - - - - - - 101
Finance costs (164) - - - - - - (164)
Profit before tax 498 - 50 (29) (338) 29 644 854
Tax (160) 238 - - - - - 78
Profit for the period 338 238 50 (29) (338) 29 644 932
This information is provided by RNS
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