Final Results

Frenkel Topping Group PLC 27 March 2008 FRENKEL TOPPING GROUP PLC (the 'Group' or the 'Company') PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007 Frenkel Topping Limited (Frenkel Topping) is the trading subsidiary of Frenkel Topping Group Plc, Frenkel Topping provides specialist independent financial advice on the investment of personal injury damages and clinical negligence awards. Frenkel Topping offers a complete service for all personal injury claims handlers, lawyers and individual clients, dealing with awards from a few thousand pounds to multi-million pound cases. Frenkel Topping's expertise includes asset protection, bespoke investment portfolios, analysis of periodical payments, Court of Protection portfolios and provision and setting up of trustee and receivership bank accounts. Financial Highlights Year ended 31 Dec Year ended 31 Dec 2007 2006 Revenue £2,757,411 £2,570,504 Gross Profit £1,674,385 £1,400,037 Profit/(loss) from operations before share based compensation and provisions £250,847 £(93,649) Profit/(loss) before taxation £47,134 £(446,641) Cash generated from/(used in) operations £282,532 £(141,310) Operational Highlights • Revenue increased 7% • Gross Profit increased 20% • Profit from operations before share based compensation and provisions increased to £250,847 from loss of £93,649 For further information:- Frenkel Topping Group plc Richard Fraser (Chief Executive) Tel No: 0161 886 8000 W.H. Ireland Limited David Youngman Tel No: 0161 832 2174 CHAIRMAN'S STATEMENT Results This has been an excellent year of progress for the Group. I am pleased to report that the momentum established during the previous half year to 31 December 2006 has been maintained during 2007, resulting in a profit from operations before share based compensation and provisions of £250,847 (2006: loss £93,649) and profit before taxation of £47,134 (2006: loss £446,641). In comparison to last year, revenue has increased by 7% and gross profit has increased by 20%. During the year the Group has generated cash from operations of £282,532 (2006: cash absorbed of £141,310). The net asset value of the Group as at 31 December 2007 was £4,749,122 (2006: £4,582,142). These significant improvements have occurred as a result of the increase in the recurring income from the Funds in the Investment Management Service (FIMS) and in addition, the focus on revenue generation and cost control implemented across all elements of the business by the Board since 2006. As at 31 December 2007 the Group's FIMS had increased to £200m. Dividends The Board does not propose a dividend. International Financial Reporting Standards (IFRS) These are the first year's results for the Group to be stated under International Financial Reporting Standards (IFRS) and the comparatives have been restated on this basis. The date of transition to IFRS for the Group was 1 January 2006. The Goodwill in the consolidated balance sheet of the Group is attributable to the acquisition of the trading subsidiaries Frenkel Topping Limited and Frenkel Topping Structured Settlements Limited. Under IFRS3 the carrying value of the goodwill is reviewed at each balance sheet date to determine if the asset has suffered any impairment. Having considered the carrying value of the goodwill to future revenue streams at the date of conversion to IFRS the board are satisfied with the carrying value of the goodwill. Funding During the period the Group entered into a £500,000 loan facility with MBC Settlements Limited (MBC). MBC is a Gibraltar based investment company operating in the financial services sector. In consideration of MBC providing the loan facility, the Group has issued options to MBC in respect of 10,000,000 new ordinary shares. The options can be exercised at any time until May 2010 provided that the aggregate value of the options exercised does not exceed the total of the sums drawn down on the loan facility by the Group. As at 31 December 2007, £200,000 has been utilised. The loan will be used for the strategic developments of the Group. Strategy The Group's strategy remains focussed on developing the Frenkel Topping brand in order to be recognised as a leading specialist in the field of investing personal injury and clinical negligence awards on behalf of the clients. Our skills prevail in the development of bespoke financial solutions and adding value to the professional services offered by the legal community servicing this particular field of activity. Our primary focus not only relates to the generation of revenue from the initial sale, but also from servicing our clients as their financial needs develop and change. This has resulted in the increase in FIMS shown year on year and the continued protection of our recurring income streams for the future. Directors and employees The Board recognises that its employees are the biggest assets of the Group. The current success of the Group has been achieved as a result of a committed and highly competent team at all levels within the organisation. We seek to retain and reward individuals based on their contribution to the success of the group and this objective is demonstrated by each employee having share options in the Company once they have completed a year of service. Prospects The Group has commenced 2008 from its strongest financial position to date. The Board has set challenging targets for the Executives to achieve and in addition we seek to increase our recurring revenue streams over future years. The Board expects the year to be of continuing progress especially in the area of brand development. We will continue to actively pursue growth opportunities that would enhance shareholder value. GROUP INCOME STATEMENT For the year ended 31 December 2007 2007 2006 Notes £ £ REVENUE 3 2,757,411 2,570,504 Direct staff costs (1,083,026) (1,170,467) GROSS PROFIT 1,674,385 1,400,037 ADMINISTRATIVE EXPENSES Share based compensation (135,352) (198,301) Provisions - (106,985) Other (1,423,538) (1,493,686) TOTAL ADMINISTRATIVE EXPENSES (1,558,890) (1,798,972) Profit/(loss) from operations before share based compensation and provisions 250,847 (93,649) - provisions - (106,985) - share based compensation (135,352) (198,301) PROFIT/(LOSS) FROM OPERATIONS 115,495 (398,935) Finance costs (68,361) (47,706) PROFIT/(LOSS ) BEFORE TAX 47,134 (446,641) Income tax expense 4 (28,503) (25,039) PROFIT/LOSS)FOR PERIOD 18,631 (471,680) ============ =========== ============ =========== PROFIT/(LOSS) ATTRIBUTABLE TO: Equity holders of parent (15,386) (583,272) Minority Interest 34,017 111,592 18,631 (471,680) ========== ========= ========== ========= Loss per ordinary - basic (pence) 5 (0.03)p (1.14)p Loss per ordinary - diluted (pence) 5 (0.03)p (1.14)p ========== ========= ========== ========= The results for the period are derived from continuing activities. GROUP BALANCE SHEET As ended 31 December 2007 2007 2006 £ £ ASSETS NON CURRENT ASSETS Goodwill 5,095,287 5,095,287 Property, plant and equipment 51,670 43,648 Deferred taxation 35,615 11,106 5,182,572 5,150,041 CURRENT ASSETS Accrued income 394,032 329,010 Trade receivables 289,925 392,284 Other receivables 123,399 101,067 Cash 26 29 807,382 822,390 TOTAL ASSETS 5,989,954 5,972,431 ========= ========= ========= ========= EQUITY AND LIABILITIES EQUITY Issued capital 273,927 273,927 Share premium account 5,744,864 5,744,864 Share based payment reserve 421,850 286,498 Treasury share reserve (25,000) (25,000) Retained losses (2,222,170) (2,206,784) Other reserve 12,997 - 4,206,468 4,073,505 Minority interest 542,654 508,637 TOTAL EQUITY 4,749,122 4,582,142 NON CURRENT LIABILITIES Other payables 75,000 105,689 Financial liabilities 194,176 - 269,176 105,689 CURRENT LIABILITIES Amounts due to bankers and short term financial liabilities 143,587 473,433 Current taxation 119,025 106,984 Trade and other payables 631,507 579,376 Lease obligations - 9,807 Provisions 77,537 115,000 971,656 1,284,600 TOTAL LIABILITIES 1,240,832 1,390,289 TOTAL EQUITY AND LIABILITIES 5,989,954 5,972,431 ========= ========= ========= ========= GROUP STATEMENT OF CHANGE IN EQUITY For the year ended 31 December 2007 Share based payment Treasury Profit and reserve share loss account Share Capital Share Premium reserve Other reserve Total Equity £ £ £ £ £ £ £ Balance 1 January 2006 227,998 3,586,193 88,197 (25,000) (1,623,512) - 2,253,876 Share issue 45,929 2,158,671 - - - - 2,204,600 Share based compensation - - 198,301 - - - 198,301 Loss for the period - - - - (583,272) - (583,272) _____________ _____________ _____________ ___________ _____________ _____________ _____________ Balance 1 January 2007 273,927 5,744,864 286,498 (25,000) (2,206,784) - 4,073,505 Share base compensation - - 135,352 - - - 135,352 Loss for the period - - - - (15,386) - (15,386) Equity element of compound instrument - - - - - 12,997 12,997 _____________ _____________ _____________ ___________ _____________ _____________ _____________ Balance 31 December 2007 273,927 5,744,864 421,850 (25,000) (2,222,170) 12,997 4,206,468 ============= ============= ============= =========== ============= ============= ============= ============= ============= ============= =========== ============= ============= ============= The treasury share reserve represents the cost of 1,067,471 shares held by FTG EBT Trustees Limited, a subsidiary of Frenkel Topping Group Plc. The open market value of the shares held at 31 December 2006 was £63,749. The other reserve represents the fair value of the embedded option to convert the loan instrument into equity. GROUP CASH FLOW STATEMENT For the year ended 31 December 2007 Year ended Year ended 31 December 31 December 2007 2006 £ £ Profit/(loss) for the year 18,631 (471,680) Adjustments to reconcile profit/(loss) for the year to cash generated/(used in) from operating activities Tax expense 28,503 25,039 Finance cost 68,361 47,706 Share based compensation 135,352 198,301 Depreciation 26,920 30,219 Decrease/(increase) in accrued income, trade and other receivable 19,044 (71,551) (Decrease)/increase in trade and other payables (14,279) 100,656 Cash generated/(used in) operations 282,532 (141,310) Taxation (39,605) (18,415) Cash generated from/(used in) operating activities 242,927 (159,725) Investment activities Acquisition of property, plant and equipment (34,942) (5,443) Acquisition of additional shareholding in subsidiary undertaking - (17,030) Cash used in investing activities (34,942) (22,473) Financing Net borrowings 114,668 23,351 Repayment of finance lease (9,807) (4,118) Interest on loans (68,361) (47,705) Cash from/(used in) financing 36,500 (28,472) Increase/(decrease) in cash and cash equivalents 244,485 (210,670) Opening cash and cash equivalents (287,700) (77,030) Closing cash and cash equivalents (43,215) (287,700) =============== =============== =============== =============== 1. GENERAL INFORMATION The preliminary financial information does not constitute full accounts within the meaning of section 240 of the Companies Act 1985 but is derived from accounts for the years ended 31 December 2007 and 31 December 2006. The figures for the year ended 31 December 2007 are audited. The preliminary announcement is prepared on the same basis as set out in the statutory accounts for the year ended 31 December 2007. Those accounts upon which the auditors issued an unqualified opinion, will be delivered to the Registrar of Companies following the Annual General Meeting. While the financial information include in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), this announcement does not in itself contain sufficient information to comply with IFRS's. Frenkel Topping Group Plc is incorporated and domiciled in the United Kingdom. At the date of the authorisation of the financial information the following standards and interpretations, which have not been applied in the financial information, were in issue but not yet effective: IFRS 7 Financial instruments: Disclosures and the related amendment to IAS 1 on capital disclosures. IFRS 8 Operating segments IAS 1 Revised - Capital Disclosures and other changes IFRIC 10 Interim financial reporting and impairment IFRIC 11 Group and treasury share transactions IFRIC 12 Service concession arrangements IFRIC 13 Customer Loyalty Programmes IFRIS 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirement and their Interaction IAS 27 Amendment - Consolidated and Separate Financial Statements IFRS 3 Amendment - Business Combinations IFRS 2 Amendment - Share-based payment The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial information when the relevant standards and interpretations come into effect. 2. SIGNIFICANT ACCOUNTING POLICIES The Group's previous financial statements have been prepared under UK Generally Accepted Accounting Practice (UK GAAP). However for the financial year ended 31 December 2007, the Group has decided to prepare its annual consolidated financial statements in accordance with IFRS as adopted by the European Union (EU) and implemented in the UK. The presentation of financial information under IFRS is governed by IFRS 1. In some cases this will require the presentation of an item in a different position, or the use of a different description in the IFRS income statement or balance sheet to that adopted in the UK GAAP profit and loss account or balance sheet. These reclassifications have been described in the explanatory notes. An explanation of how the transition from UK GAAP to IFRS has affected the Group's results and income statement for the year ended 31 December 2006, and the equity and balance sheets as at 1 January 2006 and 31 December 2006 is set out in note 6. Statutory accounts for the year ended 31 December 2006, which were prepared under accounting practices generally accepted in the UK, have been filed with the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain any statement under Section 237 (2) or (3) of the Companies Act 1985. GOING CONCERN The preliminary announcement is prepared on a going concern basis, which assumes the Group will continue in operational existence for the foreseeable future. The Group's ability to meet its future working capital requirements and therefore continue as a going concern is dependent upon it being able to generate significant revenues and free cash flow. The directors have prepared projections which they consider to be prudent and demonstrate that the business can operate within its existing cash resources, and have identified a series of realistically achievable actions that they are committed to taking to mitigate the rate of cash outflow should revenues not be secured as predicted. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The preparation of the financial information in conformity with IFRS requires management to make judgement, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results which form the basis of making the judgements about carrying values of assets and liabilities that are both readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. REVENUE Revenue is recorded at the fair value of the consideration, excluding value added tax, made during the year from client's contracts. Income is accrued based on the stage of completion of specific client contracts where the outcome can be assessed with reasonable certainty and the value for that service has been agreed between the group and the client. GOODWILL Goodwill arising on consolidation 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, associate or jointly controlled entity at the date of acquisition. Goodwill on acquisition of subsidiaries is separately disclosed. Goodwill is recognised as an asset and reviewed for impairment at least annually. Any impairment is recognised immediately in the income statement and is not subsequently reversed. Goodwill is allocated to cash generating units for the purpose of impairment testing. Each of these cash generating units represents the Group's investment in each country of operation by primary reporting segment. On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Goodwill arising on the 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. Goodwill has been re-stated on transition to IFRS as certain intangible assets, which were not recognised under UK GAAP, have now been separately classified, as they meet the recognition criteria under IAS 38 for an individual company. No negative goodwill was eliminated on transition to IFRS. IMPAIRMENT At each balance sheet date, the Group reviews the carrying amounts of its intangibles, property, plant and equipment 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. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of 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 been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a 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. PROPERTY, PLANT AND EQUIPMENT All fixed assets are initially recorded at cost. Depreciation is provided at rates calculated to write off the cost less residual value of each asset over its expected useful life, as follows: Fixtures & fittings - 25% straight line Leasehold improvements - over the term of the lease Motor vehicles - 25% straight line Computer equipment - 25% straight line EMPLOYEE SHARE OWNERSHIP PLANS The Group operates an Employee Benefit Trust and has de facto control of the shares held by the trust and bears their benefits and risks. The Group records certain assets and liabilities of the trust as its own. Finance costs and administrative expenses are charged as they accrue. FINANCIAL INSTRUMENTS Financial assets and financial liabilities are recognised on the balance sheet when the Group has become a party to the contractual provisions of the instrument. Trade and other receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. Financial liability Financial liabilities are classified according to the substance of the contractual arrangements entered into. An instrument will be classified as a financial liability when there is a contractual obligation to deliver cash or another financial asset to another enterprise. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of any outstanding bank overdraft where a right of set off exists. Borrowings Interest-bearing bank loans and overdrafts are initially recorded at fair value, which represents the fair value of the consideration received, net of any issue costs associated with other borrowings. Borrowings are subsequently stated at amortised cost. Finance charges, including premiums payable on settlement or redemption, are accounted for on an accrual basis 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. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. Convertible loans Convertible loans are regarded as compound instruments, consisting of a liability component and an equity component. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible debt. The difference between the proceeds of issue of the convertible loan notes and the fair value assigned to the liability component, representing the embedded option to convert the liability into equity of the Group, is included in equity. Issue costs are apportioned between the liability and equity components of the convertible loan notes based on their relative carrying amounts at the date of issue. The portion relating to the equity component is charged directly against equity. The interest expense on the liability component is calculated by applying the prevailing market interest rate for similar non-convertible debt to the instrument. The difference between this amount and the interest paid is added to the carrying value of the convertible loan note. PROVISIONS Provisions are recognised when the Group has a present obligation as a result of a past event which it is probable will result in an outflow of economic benefits that can be reliably estimated. LEASING Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and the reduction of lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. EMPLOYEE BENEFITS The Group operates a defined contribution scheme. The pension costs charged in the financial statements represent the contribution payable by the Group during the year. TAXATION The tax expense represents the sum of the current tax expense and deferred tax expense. 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 by 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 amount 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 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 which affects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based upon tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. SHARE-BASED COMPENSATION The group operates an equity-settled, share based compensation plan. The fair value of the employee services received in exchange for the grant of options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example, profitability and growth targets). Non-market vesting conditions are included in the assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the group revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the income statement, and a corresponding adjustment to reserves over the remaining vesting period. The proceeds received net of any attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. 3. REVENUE The total revenue, profit before tax and net assets are attributable to the one principal activity of the Group, the provision of advice regarding structured settlements and related financial services. All revenue and costs originate within the United Kingdom. 4. TAXATION 2007 2006 £ £ Analysis of charge in year Current tax UK corporation tax 58,627 39,404 Adjustments in respect of previous periods (5,615) (10,328) ___________ ___________ Total current tax charge 53,012 29,076 ___________ ___________ Deferred tax Temporary differences, origination and reversal (24,509) (4,037) Effect of tax rate changing on opening balance - - ___________ ___________ Total deferred tax credit (24,509) (4,037) ___________ ___________ Tax on profit/(loss) for the period 28,503 25,039 =========== =========== =========== =========== FACTORS AFFECTING TAX CHARGE FOR YEAR The tax assessed for the period is higher than the standard rate of corporation tax in the UK 30% (30%). The differences are explained below: 2007 2006 £ £ Profit/(loss) before taxation 47,134 (446,641) ======= ======= ======= ======= Profit/(loss) multiplied by standard rate of corporation tax in 14,141 (133,992) the UK of 30% (2006: 30%) Effects of: Expenses not deductible 16,662 6,162 Capital allowances for period in excess of depreciation (3,326) 2,170 Adjustments to tax charge in respect of previous periods (5,615) (10,328) Unrelieved tax losses and other deductions in period (2,268) 115,993 Marginal relief (7,188) (9,287) Short term timing differences 40,606 58,358 ___________ ___________ Current tax expense for year 53,012 29,076 =========== =========== =========== =========== 5. LOSS PER SHARE The calculation of basic loss per ordinary share is based on losses of £15,386 (2006: £583,272) and on 54,782,947 (2006: 50,956,558) ordinary shares of 0.005p each being the weighted average number of ordinary shares in issue during the period. The loss for the period and the weighted average number of ordinary shares for the purpose of calculating the diluted loss per share are the same as for the basic loss per share calculation. This is because the outstanding share options would have the effect of reducing the loss per ordinary share and would therefore not be dilutive under the terms of IAS 33. 6. EXPLANATION OF THE TRANSITION TO IFRS For all periods up to and including the year ended 31 December 2006 the Group prepared its financial statements in accordance with United Kingdom Generally Accepted Accounting Practices (UK GAAP). In preparing this financial information, the Group has started from an opening balance sheet as at 1 January 2006, the Group's date of transition to IFRS, and made those changes in accounting policies and other restatements required by IFRS 1, for the first time adoptions of IFRS. IFRS 1 allows first time adopters certain exemptions from the general requirements to retrospectively apply IFRS as effective for the 31 December 2005 year end. The optional exemptions taken by the Group are as follows: Business Combinations: The Group has elected not to apply IFRS 3 Business Combinations retrospectively to business that took place prior to the transition date. Consequently goodwill arising on business combinations before transition date remains at its previous UK GAAP carrying value as at the date of transition. The reconciliation between UK GAAP and IFRS for the Group's profit/(loss), income statement, balance sheet and total equity are presented below: Reconciliation of loss for year ended 31 December 2006 Year ended 31 December 2006 £ Loss after tax and minority interests under UK GAAP (941,176) Minority interest adjustment (127,938) Amortisation of goodwill 485,842 ___________ Loss after tax and minority interest under IFRS (583,272) =========== The principal effects identified on adoption of IFRS are discussed below: Goodwill IFRS 3 'Business Combinations', IAS 36 and IAS 38 resulted in a change to the carrying values of Goodwill. Until 31 December 2005, goodwill was amortised on a straight line basis over a period of up to 10 years from the year of acquisition and assessed for an indication of impairment at each balance sheet date. Under IFRS 3, goodwill is no longer amortised and, instead, is assessed annually for impairment. As a result of this change, the goodwill will be increased by £485,842. Minority Interest Minority interests are presented as part of equity under International Accounting Standards whilst under UK GAAP these were disclosed separately in the Group balance sheet. Losses applicable to minority interests under IAS 27 have been allocated against the majority interest, as there is no binding agreement with the minority to make additional investment to cover the losses. Reconciliation of income statement for year ended 31 December 2006 IAS 27 Consolidated IFRS 3 UK Financial Business Statements Combinations GAAP IFRS £ £ £ Revenue 2,570,504 - - 2,570,504 Cost of Sales (1,170,467) - - (1,170,467) _________ __________ __________ __________ Gross Profit 1,400,037 - - 1,400,037 Administration expenses (1,493,686) - - (1,493,686) Share based compensation (198,301) - - (198,301) Amortisation of goodwill (485,842) - 485,842 - Provisions (106,985) - - (106,985) __________ __________ __________ __________ Total Administration expenses (2,284,814) - 485,842 (1,798,972) __________ __________ __________ __________ Loss from operations (884,777) - 485,842 (398,935) Finance costs (47,706) - - (47,706) __________ __________ __________ __________ Loss before Taxation (932,483) - 485,842 (446,641) Income tax expense (25,039) - - (25,039) _________ __________ __________ __________ Loss for period (957,522) - 485,842 (471,680) Minority Interests 16,346 (127,938) - (111,592) _________ _________ _________ __________ Loss attributable to equity holders of parent (941,176) (127,938) 485,842 (583,272) ============== ============= ============= ============= ============== ============= ============= ============= Reconciliation of equity as at 31 December 2006 31 December 2006 £ Total equity under UK GAAP 4,400,802 Amortisation of goodwill 485,842 Minority interest (813,139) _________ Total equity under IFRS 4,073,505 =========== =========== Reconciliation of balance sheet as 31 December 2006 IAS 27 Consolidated IFRS 3 UK Financial Business Statements Combinations GAAP IFRS £ £ £ £ Non current assets Fixtures & Fittings 43,648 - - 43,648 Goodwill 4,609,445 - 485,842 5,095,287 Deferred tax 11,106 - - 11,106 _________ _________ _________ _________ 4,664,199 - 485,842 5,150,041 Current assets Accrued income 329,010 - - 329,010 Trade receivables 392,284 - - 392,284 Other receivables 101,067 - - 101,067 Cash 29 - - 29 _________ _________ _________ _________ 822,390 - - 822,390 _________ _________ _________ _________ Total Assets 5,486,589 - 485,842 5,972,431 ============= ============== ============== ============== ============= ============== ============== ============== Equity and Liabilities Equity Issued capital 273,927 - - 273,927 Share premium account 5,744,864 - - 5,744,864 Share based payment reserve 286,498 - - 286,498 Other reserve (25,000) - - (25,000) Retained losses (1,879,487) (813,139) 485,842 (2,206,784) __________ __________ __________ _________ 4,400,802 (813,139) 485,842 4,073,505 Minority interests (304,502) 813,139 - 508,637 Non current liabilities Other liabilities 105,689 - - 105,689 Current liabilities Amounts due to bankers and short term loans 473,433 - - 473,433 Current taxation 106,984 - - 106,984 Trade payables and other payables 579,376 - - 579,376 Lease obligations 9,807 - - 9,807 Provisions 115,000 - - 115,000 __________ _________ _________ __________ 1,284,600 - - 1,284,600 __________ _________ _________ __________ Total liabilities 1,390,289 - - 1,390,289 __________ _________ _________ __________ Total equity and liabilities 5,486,589 - 485,842 5,972,431 ============== ============== ============== ============== ============== ============== ============== ============== Reconciliation of balance sheet as 1 January 2006 (date of transition to IFRS) IAS 27 Consolidated IFRS 3 UK Financial Business Statements Combinations GAAP IFRS £ £ £ £ Non current assets Fixtures & Fittings 63,426 - - 63,426 Goodwill 2,625,855 - - 2,625,855 Deferred tax 5,143 - - 5,143 _________ _________ _________ _________ 2,694,424 - - 2,694,424 Current assets Accrued income 330,045 - - 330,045 Trade receivables 277,828 - - 277,828 Other receivables 146,972 - - 146,972 Cash 183 - - 183 _________ _________ _________ _________ 755,028 - - 755,028 _________ _________ _________ _________ Total Assets 3,449,452 - - 3,449,452 ============== ============== ============== ============== ============== ============== ============== ============== Equity and Liabilities Equity Issued capital 227,998 - - 227,998 Share premium account 3,586,193 - - 3,586,193 Share based payment reserve 88,197 - - 88,197 Own shares (25,000) - - (25,000) Retained losses (938,314) (685,198) - (1,623,512) __________ __________ __________ __________ 2,939,074 (685,198) - 2,253,876 Minority interests (540,955) 685,198 - 144,243 Non current liabilities Other payables 25,000 - - 25,000 Current liabilities Amounts due to bankers and short term loans 239,569 - - 239,569 Current taxation 101,063 - - 101,063 Trade payables and other payables 437,803 - - 437,803 Lease obligations 13,925 - - 13,925 Provisions 233,973 - - 233,973 __________ _________ _________ __________ 1,026,333 - - 1,026,333 __________ _________ _________ __________ Total liabilities 1,051,333 - - 1,051,333 __________ _________ _________ __________ Total equity and liabilities 3,449,452 - - 3,449,452 ============== ============= ============== ============== ============== ============= ============== ============== 7. BASIS OF THE PRELIMINARY ANNOUNCEMENT The board of directors of Frenkel Topping Group Plc approved the Preliminary Results on 26 March 2008. The statutory accounts for the year ended 31 December 2007 will be delivered to the Registrar of Companies following the Annual General Meeting. The statutory accounts will be posted to shareholders on 4 April 2008. Further copies will be available to the public, free of charge, at the company's registered office, 4th Floor, Statham House, Talbot Road, Old Trafford, Manchester, M32 0FP and the Company's website at www.frenkeltopping.co.uk The Annual General Meeting will be held on 13 May 2008 at 11 am at Addleshaw Goddard LLP, 100 Barbirolli Square, Manchester, M2 3AB. This information is provided by RNS The company news service from the London Stock Exchange

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