Interim Results

Focus Solutions Group PLC 07 December 2007 Embargoed until 7am 7th December 2007 Focus Solutions Group Plc "Focus" or the "Group" Interim Results Focus Solutions Group plc (AIM: FSG), a leading supplier of adaptive software solutions to the financial services industry, today announces unaudited interim results for the six months to 30th September 2007 reported under IFRS. Financial Highlights: • Total revenues up 43% to £4.0 million (2006: £2.8 million) • Operating profit before exceptional items £0.5 million (2006: operating loss before exceptional items £0.1 million) • Operating profit £0.3 million (2006: operating loss £0.3 million) • Profit before tax and interest £0.4 million (2006: loss before tax and interest £0.3 million), trading profitably for the first time in the first half of the year • Basic earnings per share 1.21 pence (2006: loss per share 0.71 pence) • Net cash balances £2.0 million (2006: £0.4 million) Operating Highlights: • New contract wins in the period included: • HSBC Bank plc - Consultancy services to assist in the scoping and analysis of requirements for the second half of a major new project being undertaken by the bank • Openwork Limited - Restructured enterprise licence agreement for the Openwork Trading Platform and for multiple sales processes covering the Conduct of Business Rules (COBs) • Further new contract wins since the period end: • AEGON Scottish Equitable - contract for IT services including the development of an intermediary extranet solution to support the sale of investment bonds and retirement products Commenting on the results, Richard Stevenson, Chief Executive said: "I am delighted to announce another period of strong growth for the Group when we achieved profitability in the first half of the year for the first time. Customers are still actively investing in new front office technology solutions to meet competitive pressures and required regulatory changes. New business enquiries at present are higher than the corresponding period last year and we remain confident in meeting expectations for the year as a whole." For further information, please contact: Focus Solutions Group plc www.focus-solutions.co.uk Richard Stevenson, Chief Executive Tel: 01926 468 300 Martin Clements, Finance Director Smithfield Tel: 0207 360 4900 Tania Wild / Reg Hoare Daniel Stewart Tel: 020 7776 6550 Graham Webster / Chloe Ponsonby CHAIRMAN'S STATEMENT Business and Operating Review Introduction I am delighted to announce another period of strong growth for the Group. Focus' financial performance for the first half of the year has been particularly satisfying, generating a profit for the first half for the first time and with sales revenues up 43% on the same period last year. Our technology has enabled us to develop long term client relationships supporting delivery across multiple channels, responding to changing needs and our customer base now includes leading financial institutions from retail banking, life, pensions and mortgage sectors in the UK and Ireland. Focus is developing into a successful, consistently growing, profitable and cash generative business. Contract momentum During the six months to 30 September 2007, Focus has continued to make good progress in leveraging business from its customer base and has restructured an enterprise licence agreement with existing client Openwork Limited, (Openwork is a directly authorised financial services distribution network with more than 2,600 advisers operating across the UK). The contract is worth between £650,000 and £900,000 over five years, includes licence, support and maintenance fees for several aspects of the Focus technology product suite and a number of solutions. The enterprise licence agreement is for the Openwork Trading Platform and for multiple sales processes covering the Conduct of Business rules for Mortgages and General Insurance business streams. Focus has extended its relationship with HSBC with a contract extension of £322,000 for consultancy services which will be carried out in the current financial year. The contract was awarded to assist in the scoping and analysis of requirements for the second half of a major new project being undertaken by the Bank. This scoping exercise will extend the Point of Sale (POS) solution that Focus is currently developing, to include the IFA sales process, commercial planning and offline working. During the period we have continued to generate further business from existing customers including Lincoln Financial Group, Irish Life, Home of Choice and BT. Since the period end, Focus signed a contract with AEGON Scottish Equitable plc to provide IT services including the development of an extended intermediary extranet service to support the sale of investment bonds and retirement products, and software licence, support and maintenance and consultancy services. focus:360 For some time, Focus has realised the potential for "productising" its key offerings, providing customers with a 'packaged' solution. We have invested in extending our Point of Sale capabilities to develop "focus:360"- the whole office solution for financial advisers. The combined assets will provide a single end-to-end solution encompassing areas such as Training and Competency (T &C), Sales Performance Management Information (MI), Compliance Monitoring and Pipeline Tracking within a refreshed POS offering. focus:360 is aimed at bancassurers, large intermediary firms, pure mortgage networks and providers with controlled distribution and encompasses a Point of Sale solution, sales support capability and back office functionality through a single technology platform that can support the financial advice sales process across the full suite of financial products. focus:360 enables Focus to differentiate itself in the market compared to traditional package software suppliers, enabling a move towards higher margin and more predictable revenues and away from higher cost, less scalable bespoke development. The UK intermediary market has previously had to integrate a number of disparate solutions to meet all their business requirements; the new proposition will offer clients significant cost benefits. focus:360 has been designed to create opportunities both in the front and back office with small and large sized intermediary firms, a potential market size of some 90 organisations. focus:technology 2007 At the end of the period, we launched a new innovative next generation technology suite - "focus:technology 2007", a refreshed and redeveloped toolkit based upon goal:technology. focus:technology enables the rapid creation of functionally rich user interfaces that can apply business intelligence in the capture, validation and presentation of data. During the period, we also announced the development of a new intermediary solution for the sale of SIPP products and opened an office in Edinburgh. The Group's intention is to be recognised as the leading provider of front office solutions to the UK financial services market and the Board has a clear strategy for both organic and non-organic growth to achieve this. To date, Focus has concentrated on developing business from our established customer base and has a strong new business pipeline. The financial services industry is still heavily regulated and organisations require intelligent technology solutions that can adapt to changing business or environmental issues. Focus' e-trading solutions and unrivalled reputation for delivering high quality, successful implementations has put the Company in a strong position to support this, particularly in reference to the mortgage market where industry wide standards are becoming a reality. One of our key objectives is to increase the proportion of turnover that is represented by annually recurring revenues. The Group has a clearly defined merger and acquisitions strategy to develop the organisation further and is looking at organisations that have a complementary client base and technology to develop a truly integrated solution for the financial services industry. Financial Review Group revenues in the first half of the year were up 43% over the same period last year at over £4.0 million (2006:£2.8 million). This reflected the progress made by the Group over the past two years in winning a series of significant new orders. Operating Profit before Exceptional items was £0.5 million compared to a loss of £0.1 million in the same period last year. Gross margins fell from 60% to 57% from the corresponding period last year. However, while revenues grew by 43%, total costs in the first half increased by only 20%, at £3.7 million, £0.6 million up on the same period last year. This reflected the increased proportion of professional services revenue and continued tight control over overhead expenditure, despite the increasing activity levels. At the operating level, we generated a profit before exceptional costs of £0.5 million, as compared to a loss of £0.1 million last year. This reflects the considerable improvements we have made to the business over the last two years. Net cash balances at the end of September 2007 were £2.0 million (September 2006: £0.4 million; 31 March 2007: £3.0 million). Overdraft facilities totalling £0.5 million are available to us from our bankers, HSBC plc. Cash outflow from operating activities in the first half was £0.8 million (2006: £0.3 million inflow). The Directors continually review the funding requirements for the Group and will ensure that the continued development of the business is properly funded. The earnings per share of 1.21 pence per share compares to 0.71 pence loss per share in the same period last year. As in previous periods, the Directors are not recommending the payment of an interim dividend. IFRS These results are the first to be prepared on the basis of International Financial Reporting Standards (IFRS). The adoption of IFRS has not had a significant impact on the underlying financial performance of the Group, other than the capitalisation of R&D costs totalling £148,000 in the period. The results for the six months ended 30 September 2006 and for the year ended 31 March 2007 have been restated in accordance with IFRS. The principal change has been the recognition of an intangible asset relating to some of the Group's Research and Development expenditure as required under IAS 38 Intangible Assets. Reconciliations of prior periods' results, balance sheets and cash flows under IFRS are presented in note 5. Outlook Demand in our main markets of Banking and Life and Pensions remains robust. The current conditions in the mortgage market have had a limited impact on trading in the year to date. Customers are still actively investing in new front office technology solutions to meet competitive pressures and required regulatory changes. New business enquiries at present are higher than the corresponding period last year and we remain confident of meeting expectations for the year as a whole. Focus' reputation in the market and the development of new market propositions, including focus:360, will enable the Group to differentiate itself from other vendors and become the benchmark by which other companies are judged. The Group will continue to develop new business within the financial services market, increasing our market coverage in the UK and Ireland and extending the depth of our solution capabilities within this market. Our focus for the year is to concentrate on improving profitability within the Group and we feel that we are in a good position moving forward. We have a strong pipeline in place and the right people, skills and technology to enable Focus to continue its growth. Alastair M Taylor Chairman Consolidated income statement For the six months ended 30 September 2007 Unaudited Six Unaudited Six Unaudited months to months to Year ended 30 September 30 September 31 March 2007 2006 2007 As restated As restated £000 £000 £000 Revenue 4,011 2,806 7,908 Cost of sales 1,722 1,129 2,441 Gross profit 2,289 1,677 5,467 Operating expenses 578 582 1,407 Distribution costs 1,406 1,391 3,070 Administrative expenses (including exceptional costs of £212k, 2006: £181k, FY2007: £209k) Operating profit/(loss) 305 (296) 990 Operating profit/(loss) before exceptional costs 517 (115) 1,199 Exceptional costs (212) (181) (209) Profit/(loss) on ordinary activities before interest 305 (296) 990 Finance income 52 11 45 Profit/(loss) on ordinary activities 357 (285) 1,035 Taxation - 83 532 Profit/(loss) for the period attributable to equity shareholders 357 (202) 1,567 Earnings per share Pence per Pence per Pence per share share share Basic earnings per share 1.21 (0.71) 5.46 Diluted earnings per share 1.27 (0.71) 5.22 All the above figures relate to the Group's continuing operations, restated to reflect the adoption of IFRS. Consolidated balance sheet For the six months ended 30 September 2007 Unaudited Unaudited Unaudited Six months to Six months to Year ended 30 September 2007 30 September 2006 31 March 2007 As restated As restated £000 £000 £000 Assets Non current assets Property, plant and equipment 197 110 160 Intangible assets 280 47 58 Trade and other receivables 294 468 221 Deferred income tax assets 450 - 450 Current assets 1,221 625 889 Trade and other receivables 3,153 2,174 3,625 Cash and cash equivalents 2,006 418 3,005 Total assets 5,159 2,592 6,630 6,380 3,217 7,519 Current liabilities Trade and other payables 1,479 799 2,615 Current tax liabilities 333 271 860 Total liabilities 1,812 1,070 3,475 Net assets 4,568 2,147 4,044 Capital and reserves attributable to equity holders of the Company Called up share capital 2,946 2,864 2,930 Share premium 9,898 9,832 9,881 Merger reserve 220 220 220 Share option reserve 197 55 62 Profit and loss reserve (8,693) (10,824) (9,049) 4,568 2,147 4,044 Restated to reflect adoption of IFRS. Consolidated cash flow statement For the six months ended 30 September 2007 Unaudited Unaudited Unaudited Six months to Six months to Year ended 30 September 30 September 31 March 2007 2006 2007 As restated As restated £000 £000 £000 Cash (outflow)/inflow from operations (766) 261 2,799 Finance income 52 11 45 Income tax received - 83 82 Net cash (outflow)/inflow from operating activities (714) 355 2,926 Investing activities Purchases of property, plant and equipment (74) (53) (127) Purchases of intangible assets (243) (7) (32) Net cash used in investing activities (317) (60) (159) Financing activities Issue of ordinary shares 32 - 115 Net cash from financing activities 32 - 115 Net (decrease)/increase in cash and cash equivalents (999) 295 2,882 Reconciliation of net cashflow to movement in net funds (999) 295 2,882 (Decrease)/ increase in cash and cash equivalents in the period (999) 295 2,882 Movement in net funds in the year Net funds at start of the period 3,005 123 123 Net funds at end of the period 2,006 418 3,005 1. Accounting Policies Basis of preparation The interim financial statements for the six months ended 30 September 2007 have not been audited and do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The Company's statutory accounts for the year ended 31 March 2007, prepared under UK Generally Accepted Accounting Principles (UK GAAP) have been delivered to the Registrar of Companies. The report of the Auditors included in those statutory accounts was not qualified and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985. Prior to 1 January 2007, the Group was required to prepare its consolidated financial statements under UK GAAP. For the year ending 31 March 2008, the Group is required to prepare its annual consolidated financial statements in accordance with accounting standards adopted for use in the European Union (International Financial Reporting Standards (IFRS)). The financial statements for the year to March 2007 were audited. The restatement of these figures to reflect the introduction of IFRS has not yet been subjected to audit and as such comparative figures for that period are disclosed as unaudited. The interim financial statements for the six months to 30 September 2007 have been prepared in accordance with the accounting policies set out below, taking into account the requirements and options set out in IFRS 1 "First time adoption of International Financial Reporting Standards". In preparing these interim financial statements the Board has not sought to implement the early adoption of IAS 34 "Interim Financial Reporting". The transition date for the Group's application of IFRS is 1 April 2006 and comparative figures for 30 September 2006 and 31 March 2007 have been restated to reflect IFRS. Reconciliations of the income statement and balance sheet from those previously reported under UK GAAP to the restated IFRS figures are given later in this report. The interim financial statements have been prepared on the historic cost basis. Accounting policies The principal accounting policies applied by the Group resulting from the adoption of IFRS are set out below. In all other respects, they are the same as those applied by the Group in its consolidated financial statements for the year ended 31 March 2007. Basis of consolidation The consolidated financial statements of Focus Solutions Group plc include the results of the Company and its subsidiaries. Intra Group transactions are eliminated on consolidation. Exceptional costs Items of income and expenditure that are considered material, either by the size and/or their nature are classified as exceptional. Such items are shown separately on the face of the profit and loss account within the relevant consolidated income statement category to which they relate. Intangible assets Intangible assets are shown at cost net of depreciation. Depreciation is calculated so as to write off the cost, less any provision for impairment, of intangible assets less their estimated residual values over the expected useful economic lives, as follows: Computer software between 2 and 4 years Research and development Development expenditure is capitalised as an intangible asset only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Group intends to complete the development and to use and sell the asset developed. The expenditure capitalised includes the cost of materials, direct labour and overhead costs directly attributable to preparing the asset for its intended use. Other development expenditure, as well as expenditure on research, is recognised in the profit and loss account when incurred. Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised in the profit and loss account on a straight line basis over the estimated useful lives of the relevant product. Taxation Current tax is based on the taxable profit for the period. 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 income tax is provided for in full using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the deferred income tax asset is realised. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax assets and liabilities are not discounted. Deferred tax assets and liabilities may be set off against each other provided there is a legal right to do so and it is managements' intention to do so. Property, plant and equipment Property, plant and equipment is shown at cost, net of depreciation. Depreciation is calculated so as to write off the cost, less any provision for impairment, of plant, property and equipment, less their estimated residual values over the expected useful economic lives of the assets concerned. The principal annual rates used for this purpose are: Fixtures and fittings Between 3 and 4 years Computer Equipment Between 2 and 4 years 2. Exceptional Items As stated in the Group's accounting policies the Directors regard certain material items as exceptional. The analysis of exceptional items is as follows. Unaudited Unaudited Unaudited Six months to Six months to Year ended 30 September 2007 30 September 2006 31 March 2007 £000 As restated As restated £000 £000 Restructuring costs 34 181 196 FRS 20 Share Based Payment Charge 135 - 13 Aborted acquisition costs 43 - - ---------- ------------ ----------- 212 181 209 ---------- ------------ ----------- Restructuring costs relate to the reorganisation of the Group's trading operations and include the costs of compensation for loss of office. FRS 20 share based payment charge is shown as exceptional because of the materiality of the amount charged in the period. Aborted acquisition costs relate to the costs incurred by the Group in relation to a possible acquisition that was not completed. 3. Income tax expense Unaudited Unaudited Unaudited Six months to Six months to Year ended 30 September 2007 30 September 2006 31 March 2007 £000 As restated As restated £000 £000 Current taxation - 83 82 Deferred taxation - - 450 Total - 83 532 4. Earnings per ordinary share Basic earnings per ordinary share is based on the profit for the period and on 29,268,963 (September 2006: 28,642,358, March 2007: 28,717,745) ordinary shares, being the weighted average number of ordinary shares in issue during the period. Diluted basic earnings per ordinary share is based on the profit for the period and on 31,135,691 (September 2006: 28,682,482; March 2007: 30,022,619) ordinary shares, being the weighted average number of ordinary shares which would have been issued if the outstanding options to acquire shares in the Group had been exercised at the average price during the period. 5. Transition Statements Focus Solutions Group plc IFRS transition statements Income statements Consolidated income statement for the six months ended 30th September 2007 As reported under UK IAS 38 Restated under GAAP IFRS Intangible Assets £000 £000 £000 Revenue 4,011 - 4,011 Cost of sales 1,838 116 1,722 -------- --------- -------- Gross profit 2,173 116 2,289 Operating expenses Distribution costs 578 - 578 Administrative expenses 1,226 32 1,194 -------- --------- -------- Operating profit before exceptional costs 369 148 517 Exceptional costs 212 - 212 -------- --------- -------- Operating profit 157 148 305 Finance income 52 - 52 -------- --------- -------- Profit on ordinary activities before taxation 209 148 357 Income tax expense 0 - 0 -------- --------- -------- Profit for the period attributable to equity shareholders 209 148 357 ======== ========= ======== Earnings per ordinary share Basic 0.71 0.50 1.21 Diluted 0.67 0.48 1.14 All the above figures relate to the Group's continuing operations, restated to reflect the adoption of IFRS. Consolidated income statement for the six months ended 30th September 2006 As reported under UK IAS 38 Restated under GAAP IFRS Intangible Assets £000 £000 £000 Revenue 2,806 - 2,806 Cost of sales 1,129 - 1,129 -------- --------- -------- Gross profit 1,677 - 1,677 Operating expenses Distribution costs 582 - 582 Administrative expenses 1,391 - 1,391 -------- --------- -------- Operating loss (296) (296) Operating loss before exceptional costs (115) - (115) Exceptional costs (181) - (181) -------- --------- -------- Operating loss (296) - (296) Finance income 11 - 11 -------- --------- -------- Loss on ordinary activities before taxation (285) - (285) Income tax expense 83 - 83 -------- --------- -------- Loss for the period attributable to equity shareholders (202) - (202) ======== ========= ======== Loss per ordinary share Basic 0.71 - 0.71 Diluted 0.71 - 0.71 All the above figures relate to the Group's continuing operations, restated to reflect the adoption of IFRS. Consolidated income statement for the year ended 31st March 2007 As reported under UK IAS 38 Restated under GAAP IFRS Intangible Assets £000 £000 £000 Revenue 7,908 - 7,908 Cost of sales 2,441 - 2,441 -------- --------- -------- Gross profit 5,467 - 5,467 Operating expenses Distribution costs 1,407 - 1,407 Administrative expenses 3,070 - 3,070 -------- --------- -------- Operating profit 990 990 Operating profit before exceptional costs 1,199 - 1,199 Exceptional costs 209 - 209 -------- --------- -------- Operating profit 990 - 990 Finance income 45 - 45 -------- --------- -------- Profit on ordinary activities before taxation 1,035 - 1,035 Income tax 532 - 532 -------- --------- -------- Profit for the period attributable to equity shareholders 1,567 - 1,567 ======== ========= ======== Earnings per ordinary share Basic 5.46 - 5.46 Diluted 5.22 - 5.22 All the above figures relate to the Group's continuing operations, restated to reflect the adoption of IFRS. Consolidated balance sheet as at 30th September 2006 As reported under UK IAS 38 Restated under GAAP IFRS Intangible Assets £000 £000 £000 Fixed assets Non current assets Property, plant and equipment 110 - 110 Intangible assets 47 - 47 Trade and other receivables 468 - 468 Deferred income tax - - - assets -------- --------- -------- 625 - 625 Current assets Trade and other receivables 2,174 - 2,174 Cash and other equivalents 418 - 418 -------- --------- -------- 2,592 - 2,592 -------- --------- -------- Total assets 3,217 - 3,217 -------- --------- -------- Liabilities Non-current liabilities Provisions - - - Trade and other - - - payables -------- --------- -------- - - - Current liabilities Trade and other payables 799 - 799 Current tax liabilities 271 - 271 -------- --------- -------- Total current liabilities 1,070 - 1,070 -------- --------- -------- Net assets 2,147 - 2,147 ======== ========= ======== Capital and reserves attributable to equity holders of the Company Called up share capital 2,864 - 2,864 Share premium 9,832 - 9,832 Merger reserve 220 - 220 Share option reserve 55 - 55 Profit and loss account reserve (10,824) - (10,824) -------- -------- -------- Total equity 2,147 - 2,147 ======== ======== ======== Restated to reflect the adoption of IFRS. Consolidated balance sheet as at 31st March 2007 As reported under UK IAS 38 Restated under GAAP IFRS Intangible Assets £000 £000 £000 Fixed assets Non current assets Property, plant and equipment 160 - 160 Intangible assets 58 - 58 Trade and other receivables 221 - 221 Deferred income tax assets 450 - 450 -------- --------- -------- 889 - 889 Current assets Trade and other receivables 3,625 - 3,625 Cash and other equivalents 3,005 - 3,005 -------- --------- -------- 6,630 - 6,630 -------- --------- -------- Total assets 7,519 - 7,519 -------- --------- -------- Liabilities Non-current liabilities Provisions - - - Trade and other - - - payables -------- --------- -------- - - - Current liabilities Trade and other payables 2,615 - 2,615 Current tax liabilities 860 - 860 -------- --------- -------- Total current liabilities 3,475 - 3,475 -------- --------- -------- Net assets 4,044 - 4,044 ======== ========= ======== Capital and reserves attributable to equity holders of the Company Called up share capital 2,930 - 2,930 Share premium 9,881 - 9,881 Merger reserve 220 - 220 Share option reserve 62 - 62 Profit and loss reserve (9,049) - (9,049) -------- -------- ------- Total equity 4,044 - 4,044 ======== ======== ======== Restated to reflect the adoption of IFRS. Focus Solutions Group plc IFRS transition statements Balance sheets Consolidated balance sheet as at 31st March 2006 As reported under UK IAS 38 Restated under GAAP IFRS Intangible Assets £000 £000 £000 Fixed assets Non current assets Property, plant and equipment 81 - 81 Intangible assets 54 - 54 Trade and other receivables 490 - 490 Deferred income tax - - - assets -------- --------- -------- 625 - 625 Current assets Trade and other receivables 3,657 - 3,657 Cash and other equivalents 123 - 123 -------- --------- -------- 3,780 - 3,780 -------- --------- -------- Total assets 4,405 - 4,405 -------- --------- -------- Liabilities Non-current liabilities Provisions - - - Trade and other - - - payables -------- --------- -------- - - - Current liabilities Trade and other payables 1,393 - 1,393 Current tax liabilities 663 - 663 -------- --------- -------- Total current liabilities 2,056 - 2,056 -------- --------- -------- Net assets 2,349 - 2,349 ======== ========= ======== Capital and reserves attributable to equity holders of the Company Called up share capital 2,864 - 2,864 Share premium 9,832 - 9,832 Merger reserve 220 - 220 Share option reserve 49 - 49 Profit and loss reserve (10,616) - (10,616) -------- -------- -------- Total equity 2,349 - 2,349 ======== ======== ======== Restated to reflect the adoption of IFRS. Independent review report to Focus Solutions Group plc Introduction We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2007, which comprises the income statement, balance sheet, cash flow statement and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the Company's annual financial statements. This interim report has been prepared in accordance with the basis set out in Note 1. As disclosed in Note 1, the next annual financial statements of the Company will be prepared in accordance with IFRS as adopted by the European Union. The accounting policies are consistent with those that the directors intend to use in the next annual financial statements. Our responsibility Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the AIM Rules for Companies and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come, save where expressly agreed by our prior consent in writing. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2007 is not prepared, in all material respects, in accordance with the basis set out in Note 1 and the AIM Rules for Companies. PricewaterhouseCoopers LLP Chartered Accountants 7 December 2007 Birmingham This information is provided by RNS The company news service from the London Stock Exchange

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