Preliminary Results

Parkmead Group (The) PLC 19 October 2006 Thursday 19 October 2006 THE PARKMEAD GROUP PLC ('Parkmead' or the 'Group') Preliminary results for the 12 months ended 30 June 2006 The Parkmead Group plc (PMG) today announces its unaudited preliminary results for the year ended 30 June 2006. Financial highlights • Core investment and advisory revenues increased 143% from £1.352 million to £3.287 million • Corporate finance business now trading profitably • Restructuring plans completed with significant reduction in costs achieved • Acquisition of Quayside Corporate Services Limited proving cash flow positive and profitable • £10.0 million share placing in February 2006; the Company has no net debt • Operating loss on continuing operations (including restructuring costs) of £2.314 million (2005 £1.744 million) • Retained loss for the year of £4.742 million (2005: £0.356 million) includes a £2.671million charge for provisions against the value of the Group's portfolio investments • Loss per share £0.028p (2005: £0.004p) Commenting on the results, Colin Goodall, Chairman of The Parkmead Group plc, said: 'In the early part of 2006 we announced our plans to fundamentally restructure the Group. I am pleased to announce that we have substantially achieved our goals. We have reduced the Group's cost base such that our core Corporate Finance Advisory business is now trading profitably. Following the share placement undertaken in February of this year the Group is now in a net cash positive position with funds available for investment and to grow the underlying businesses. The acquisition of Quayside Corporate Services Limited, profitable since acquisition, has been successfully integrated in to the Group and we are seeing strong deal flow to our Corporate Finance business. Subsequent to the year end we announced the sale of Audio Visual Machines Limited, which has further improved our cash position. We have reconstituted our Board to reflect the Group's new strategic direction. I look forward to the continued development of the Group over the coming year. ' -Ends- For further information: The Parkmead Group plc 020 7494 3080 Niall Doran CEO Gordon Ashworth, CFO Madano Partnership 0207 593 4000 Mathew Moth/Toby Wilkinson THE PARKMEAD GROUP PLC CHAIRMAN'S STATEMENT Development of the Group During the second half of the year ended 30 June 2006 the Group implemented a number of significant changes following a strategic review by the Board. During the first half of the year ended 30 June 2006 it became clear that the former business model of the Group was not viable, in terms of both profitability and growth. In particular, the Group's cash resources were in decline and the Group's trading subsidiaries were not, and were not likely to be, cash generative in the near term. The Board agreed to implement a number of significant changes to address these issues: • to reduce the Group's cost base; • to seek additional sources of capital; • to seek an exit from the Group's portfolio investments and subsidiaries; • to seek acquisitions which would enhance the Group's deal flow and also be cash generative; and • to change the core focus of the Group from being technology specific to multi sector An integral part of these changes was to re-constitute the Board to reflect the Group's new strategic direction. Kenneth Olisa, Roger Jeynes, Martin Cooper, Rupert Cook, Richard Fifield, John Forrest and Geoffrey Shingles stood down from the Board during the year. Subsequent to the year end Melvyn Morris also stood down. I should like to take this opportunity to thank them for their contribution to the Group. During the year Niall Doran was appointed Chief Executive Officer, David Mills was appointed Executive Director following the acquisition of Quayside Corporate Services Limited and Gordon Ashworth was appointed as Chief Financial Officer. Additionally the Group made a number of Non Executive appointments. These were John Leggate, Brian Wilson, and myself as Non Executive Chairman. On 13 January 2006, Ian Taylor changed from being an Executive Director to a Non Executive Director. Subsequent to the year end Thomas Cross was also appointed as a Non Executive Director. On 16 May 2006, the Group also changed its named from Interregnum plc to The Parkmead Group plc. I am pleased to announce that the Group has substantially completed the changes arising out of the strategic review: • the Company's core operating costs have been substantially reduced and by way of example our annualised payroll costs have reduced from £1.351 million to £0.689 million. A further £0.377 million loss was incurred in 2006 by our US operation prior to its closure during the year; • in early February 2006 the Group raised £10.0 million before expenses through a placing with institutional investors; • our efforts to realise value through the sale of our portfolio and subsidiary companies have proven more time consuming than envisaged. However, we continue to keep this position under review and on 6 October 2006 the Group announced the sale of Audio Visual Machines; • additionally, the Group acquired the entire share capital of Quayside Corporate Services Limited ('QCS'). QCS provides business turnaround consulting services and is highly complimentary to the Group's corporate finance advisory business. The QCS business is cash generative and is performing in line with expectations; and • we have moved away from an exclusive focus on the technology sector and are now engaging in corporate finance advisory activities across the telecom, defence, transport and energy sectors. Results and Dividends In the interim report for the six months ended 31 December 2005 an operating loss of £1.593 million was reported. The retained loss for the same period reported was £3.347 million. Following the completion of our restructuring plans and the downward revaluation of our portfolio holdings, the overall operating loss for the year amounted to £2.305 million (after restructuring costs) and the retained loss for the year amounted to £4.742 million. The Board is not recommending the payment of a dividend (2005: £nil). Investment and Advisory Corporate Finance Business The Group's corporate finance team operates out of The Parkmead Group plc. Our 2006 revenues grew 143% to £3.287 million (2005: £1.352 million) due to some significant corporate finance deals and were further enhanced following the acquisition of QCS. The loss for the year reflects the completion of our restructuring and cost reduction exercise which was implemented in the early part of 2006 and the results of our assessment of our portfolio companies described below. Our corporate finance activity is now well placed to produce profitable and sustainable growth. Broadening the team's sector focus has delivered an increased deal flow with the result that performance in the first quarter of the financial year ending 30 June 2007 has been profitable. We are particularly pleased to see opportunities flowing into the team out of QCS, which has also traded profitably since acquisition. Current assignments cover the energy, aviation and the consulting sectors. The Group's operations in the USA were heavily loss making during the year and, accordingly, the Group closed this operation prior to the year end. Portfolio Investments Performance of the Group's portfolio of technology investments has been mixed. The Group values its investments according to the International Private Equity and Venture Capital Valuation guidelines ('IPEVC'). Applying the IPEVC guidelines as at 30 June 2006 produced a valuation for the portfolio of £3.059 million (2005: £5.648 million). Following the appointment of administrators to Keycrypt, Netinfo, Webscreen and Nanomagnetics the Group recognised additional provisions during the year to provide fully against the carrying values of these investments. The Group's holdings in Open Text and Adaptive were disposed of during the year and were fully provided for prior to their disposal. During the year the Group also provided fully against the carrying value of its investments in Blue Arc, Elite Strategies, Futureroute, Knowledge=Power, Oilcats, Raidtec, and Speed Trap. Following the valuation exercise undertaken in accordance with the IPEVC rules, the Group has assessed the value of its investments in Respond, Red M and Metapraxis resulting in a downward valuation. The additional provisions resulted in a charge to the profit and loss account of £2.671million and the reversal of prior year revaluations. As previously stated the Group continues to pursue disposal strategies with regards to its non core subsidiaries and investments. Following the change of strategy and direction noted above the Group made its first investment as principal by way of the acquisition of 4.7% of Thruvision Limited (Thruvision) for a consideration of £1.052 million. Thruvision has developed proprietary non intrusive imaging technologies used in the detection of explosives. Thruvision's technologies are of significant interest to the security and defence industries and we believe that this investment will be realised through a trade sale in the near to mid term. Subsidiaries The Group's other two trading subsidiaries delivered much improved performance during the year. Software Development, Support and Marketing Yospace Technologies Limited ('Yospace') develops, installs and maintains message management systems for mobile phone operators and has also developed user generated content solutions for the mobile phone industry and other content providers. Yospace's turnover increased to £1.885 million (2005: £1.235 million) due to new contract wins across Europe, and, for the six months ended 30 June 2006, Yospace was profitable at the operating level. The Group is satisfied with the trading performance of this business. Audio Visual Systems Audio Visual Machines Limited ('AVM') designs, installs and services audio visual systems. Turnover in AVM increased from £1.892 million (for the five months from acquisition in January 2005 to 30 June 2005) to £7.944 million for the year ended 30 June 2006. Of this £6.052 million increase, £2.171 million arose on the acquisition of the Video Meeting Company Limited made by AVM during the year. AVM traded profitably throughout the year. As previously stated, the Group has sought to realise value from these trading subsidiaries and in this regard the Group announced the sale of AVM for a consideration of £1.275 million before expenses on 6 October 2006. Accordingly the results of AVM have been classified under discontinued operations in the profit and loss account. Key Performance Indicators The Board monitors performance in its investment and advisory businesses through the reporting of monthly profit and loss accounts, cash flow forecasts, and balance sheet reporting. Additionally key performance indicators are set, against which the Board can assess performance and prospects for the businesses. With regard to QCS, the Board monitors each assignment undertaken against budgeted profit and gross profit margin. With regard to the corporate finance business, revenue is analysed between recurring revenue streams and success fees. The baseline target is to cover fixed costs with recurring revenues. The Board continues to monitor the performance of its other investments to seek the maximum returns on exit. Principal Risks and Uncertainties The principal trading risks of the Group's corporate finance business are deal flow and the Group's ability to recruit and retain experienced corporate finance executives. With regard to deal flow the acquisition of QCS has improved the Group's access to advisory, merger and acquisition opportunities significantly through its established network of banking and intermediary relationships. Recruitment and retention of experienced corporate finance executives remains challenging. However, the Board believes that the Group is well placed to create innovative and attractive packages for suitable staff. The Group's investment business is also exposed to any downturn in performance of the underlying businesses in which it holds an interest. The Board regularly evaluates the financial position of its investment portfolio. Outlook This has been a year of significant change for the Group. Following the placement undertaken in February 2006 we have raised sufficient working capital to develop the Group and we have reduced the Company's debt. We have refocused our corporate finance business and this division is now trading profitably. QCS has traded profitably since acquisition. Importantly, it is also proving highly effective in creating deal flow for our corporate finance team. Corporate activity in our business sectors remains strong and the Board believes that the Group is well placed to benefit from this strength. Furthermore the Board believes that by widening the Group's sector focus additional advisory opportunities will arise and this has been borne out by trading in the first quarter of the current financial year. The acquisition of QCS, whose primary focus is on turnaround opportunities arising out of over indebted businesses, effectively mitigates the Group against a general business downturn. We will continue to seek value through exiting from our portfolio investments and non core subsidiaries. The Directors are satisfied with the position of the companies within the Group as at the year ended 30 June 2006. The Group is now well positioned to grow a profitable and growing business. Colin Goodall 19 October 2006. .....................'our business is, fundamentally, in better shape. We have realigned our cost base with our revenues, our acquisition of QCS is proving highly complimentary across the wider Group, we have increased our financial resources and we have eliminated our indebtedness in the Company. We are now well placed to build a profitable and growing business'............ Niall Doran Chief Executive 19 October 2006 THE PARKMEAD GROUP PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 JUNE 2006 (UNAUDITED) Continuing Operations Discontinued Existing Acquisitions Operations Total Total 2006 2006 2006 2006 2005 Notes £ £ £ £ £ Turnover 3 4,551,940 487,575 7,966,872 13,006,387 7,981,615 Cost of sales - (316,625) (4,672,914) (4,989,539) (2,291,818) Gross profit 4,551,940 170,950 3,293,958 8,016,848 5,689,797 Administrative expenses (7,095,771) (47,296) (3,284,615) (10,427,682) (7,351,725) Other operating income 106,054 - - 106,054 108,198 Operating (loss)/profit (2,437,777) 123,654 9,343 (2,304,780) (1,553,730) Profit on sale of investments - 4,434 Exceptional profit on deemed 4 363,715 - disposal Release of prior year provision - 1,271,819 against investments Amounts written off investments 4 (2,670,624) (98,716) Net interest payable (1,553) (58,687) Loss on ordinary activities before taxation 3 (4,613,242) (434,880) Taxation (41,873) 30,300 Loss on ordinary activities after taxation (4,655,115) (404,580) Minority interest - equity (86,587) 49,028 Loss for the financial year 7 (4,741,702) (355,552) Loss per 5p ordinary share - basic and diluted 6 (0.028) (0.0039) THE PARKMEAD GROUP PLC GROUP NOTE OF HISTORICAL COST PROFITS AND LOSSES FOR THE YEAR ENDED 30 JUNE 2006 (UNAUDITED) 2006 2005 £ £ Loss on ordinary activities before taxation (4,613,242) (434,880) Write-down of previous temporary diminution in value of fixed asset investments (306,464) charged against revaluation reserve Historical cost loss on ordinary activities before taxation (4,919,706) (434,880) Historical cost loss for year retained after taxation and minority interest (5,048,166) (355,552) GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 30 JUNE 2006 (UNAUDITED) 2006 2005 £ £ Loss for the financial year attributable to members of the parent company (4,741,702) (355,552) Unrealised surplus on revaluation of fixed asset investments - 953,305 Write-down of previous revaluation of fixed asset investments (1,095,754) (256,896) Temporary diminution in value of fixed asset investments - (360,290) Currency translation of foreign currency investments 9,772 - Total recognised losses relating to the year (5,827,684) (19,433) THE PARKMEAD GROUP PLC CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2006 (UNAUDITED) 2006 2005 £ £ £ £ FIXED ASSETS Intangible assets 8,176,776 863,324 Tangible assets 598,355 617,484 Investments 3,059,365 5,648,003 11,834,496 7,128,811 CURRENT ASSETS Stock 252,971 160,637 Debtors 6,697,391 2,038,681 Cash at bank and in hand 6,207,315 886,456 13,157,677 3,085,774 CREDITORS Amounts falling due within one year (5,187,657) (3,296,519) NET CURRENT ASSETS /(LIABILITIES) 7,970,020 (210,745) TOTAL ASSETS LESS CURRENT LIABILITIES 19,804,516 6,918,066 CREDITORS Amounts falling due after more than one year (694,982) (825,274) PROVISION FOR LIABILITIES AND CHARGES (108,816) (3,944) NET ASSETS 19,000,718 6,088,848 CAPITAL AND RESERVES Called up share capital 18,417,089 4,621,263 Share premium account - 19,430,496 Revaluation reserve - 789,290 Merger reserve (952,109) (2,406,655) Profit and loss account 1,198,507 (16,159,905) EQUITY SHAREHOLDERS' FUNDS 7 18,663,487 6,274,489 MINORITY INTERESTS 337,231 (185,641) CAPITAL EMPLOYED 19,000,718 6,088,848 THE PARKMEAD GROUP PLC CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2006 (UNAUDITED) 2006 2005 £ £ Net cash flow from operating activities (3,697,293) (1,086,852) Returns on investments and servicing of finance (1,553) 235,543 Taxation 83,483 96,724 Capital expenditure and financial investment (1,221,727) (862,582) Acquisitions and disposals (406,776) (471,714) Cash outflow before financing (5,243,866) (2,088,881) Financing 10,584,419 (110,814) Increase/(decrease) in cash 5,340,553 (2,199,695) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS 2006 2005 £ £ Increase/ (decrease) in cash in the year 5,340,553 (2,199,695) Decrease in debt and lease financing 1,632,262 110,814 Finance leases acquired with subsidiaries (9,132) (162,743) Loan stock issued on acquisition of subsidiary - (300,000) Other non-cash changes - new finance leases (12,690) - Movement in net funds/ (debt) 6,950,993 (2,551,624) Net (debt)/funds at 1 July (1,598,757) 952,867 Net funds/ (debt) at 30 June 5,352,236 (1,598,757) THE PARKMEAD GROUP PLC NOTES TO THE PRELIMINARY RESULTS YEAR ENDED 30 JUNE 2006 1 PRELIMINARY ANNOUNCEMENT The preliminary results for the year ended 30 June 2006 are unaudited. The financial information contained in this announcement does not constitute the Group's audited statutory financial statements for the year ended 30 June 2006 within the meaning of Section 240 of the Companies Act 1985. The financial information for the period from incorporation to 30 June 2005 has been extracted from the Group's statutory financial statements for that period which have been delivered to the Registrar of Companies. The report of the auditors on those financial statements was unqualified and did not contain any statements under either Section 237(2) (accounting records or returns inadequate or accounts not agreeing with records and returns) or 237(3) (failure to obtain necessary information and explanations) of the Companies' Act 1985. The financial information contained in this announcement has been prepared under accounting policies set out in Group financial statements for the period ended 30 June 2005, except where noted below in the basis of preparation. As at the date of this announcement, the auditors have not reported on the Group's financial statements for the year ended 30 June 2006, nor have such financial statements been delivered to the Registrar of Companies. The financial statements for the year ended 30 June 2006 will be distributed to shareholders prior to, and filed with the Registrar of Companies following the Annual General Meeting. 2 ACCOUNTING POLICIES Basis of preparation The financial statements are prepared under the historical cost convention modified to include the revaluation of fixed asset investments and in accordance with the Companies Act 1985 and applicable accounting standards in the United Kingdom, except with regard to the specific provisions of the Act relating to the revaluation of fixed asset investments that constitute associated undertakings as explained in fixed asset investments below. Changes in accounting policy The following accounting standards, which were issued during the year, have been adopted by the Group with no significant impact on these financial statements, including the comparatives: FRS 17 'Retirement Benefits', FRS 21' Events after the balance sheet date', FRS 22 'Earnings per Share', FRS 25 'Financial Instruments: disclosure and presentation' and FRS 28' Corresponding amounts'. Going concern The Group's balance sheet has net funds of £5.352 million which includes positive cash balances of £6.207 million. Following the restructuring plans announced in February 2006, and their subsequent implementation, the Group's cost base has been reduced significantly. A cash flow forecast has been prepared for the next twelve months which shows that the Group will operate comfortably within its available cash resources. Accordingly, the directors continue to adopt the going concern basis in the preparation of these accounts. Fixed asset investments Fixed asset investments, comprising equity shares, and loans are stated at cost or valuation. In 2005, the Group applied the 'True and Fair override' principle with regard to a departure from the Companies Act 1985, as permitted by FRS 9 for companies within the investment industry. This override allows associated undertakings to be recorded at fair value rather than to be equity accounted. The principle has been applied as the investments are held for their marketable value rather than as a media through which the Group carries out its business. Certain investment holdings were diluted in the period such that no associated undertakings were held at the year ended 30 June 2006. The Group has applied the Alternative Accounting Rules to record its fixed asset investments at market value as permitted by the Companies Act 1985. 3 SEGMENTAL ANALYSIS a) Business Segment Analysis The group is organised into three business segments: Investment and advisory, software development, support and marketing and design, supply and installation of audio visual systems. Loss on ordinary activities before taxation Turnover and minority interest Net assets 2006 2005 2006 2005 2006 2005 £ £ £ £ £ £ Continuing operations: Investment and advisory 3,286,875 1,351,612 (4,346,717) (145,163) 18,697,961 6,767,762 Less: inter segmental (132,000) (325,000) - - - - sales Software development, 1,884,640 1,234,632 (245,846) (478,698) (963,426) (777,494) Support and marketing 5,039,515 2,261,244 (4,592,563) (623,861) 17,734,535 5,990,268 Discontinued Operations Investment and advisory 22,497 - (376,550) - (2,975) - Mobile and wireless - 3,828,634 - 63,117 - - Consultancy Design, supply and 7,944,375 1,891,737 355,871 125,864 1,269,158 98,580 install of audio visual systems 13,006,387 7,981,615 (4,613,242) (434,880) 19,000,718 6,088,848 The segmental analysis of turnover, loss before tax and net assets for the investment and advisory business includes £487,575, £128,925 and £140,325 for the year ended 30 June 2006 in respect of Quayside Corporate Services Limited which was acquired during the year. b) Geographical Segment Analysis All turnover originated in the UK. i) Turnover by destination is as follows: 2006 2005 £ £ UK 10,342,438 7,342,289 Other European countries 952,594 71,525 USA and Canada 1,697,303 444,651 Other 14,052 123,150 13,006,387 7,981,615 2006 2005 ii) Loss on ordinary activities before taxation £ £ UK (4,236,692) (434,880) USA and Canada (376,550) - (4,613,242) (434,880) 3 SEGMENTAL ANALYSIS (CONTINUED) 2006 2005 iii) Net assets £ £ UK 19,003,693 6,088,848 USA and Canada (2,975) - 19,000,718 6,088,848 The segmental analysis of turnover, loss before tax and net assets for the United Kingdom includes £487,575, £128,925, and £140,325 for the year ended 30 June 2006 in respect of Quayside Corporate Services Limited which was acquired during the year. The segmental analysis of turnover, profit before tax and net assets for the United Kingdom includes £7,944,375 (2005: £5,720,371), £355,871 (2005: loss (£133,531)) and £1,269,158 (2005: £228,076) at 30 June 2006 in respect of Audio Visual Machines Limited and its subsidiaries which were discontinued during the year. The comparative figures for the year ended 30 June 2005 also include the discontinued activities of Cellular Design Services Limited, a former subsidiary undertaking of the Group, which was deconsolidated in that year. The segmental analysis of turnover, loss before tax and net assets for the USA and Canada includes £22,676, £376,650 and £2,175 in respect of US operations which were discontinued during the year. The analysis of operating profit/ (loss) between continuing and discontinued operations is set out below: 2006 2006 2006 2006 2005 2005 2005 Continuing operations Discontinued Total Continued Discontinued Total Total Existing Acquisitions £ £ £ £ £ £ Turnover 4,551,940 487,575 7,966,872 13,006,387 2,261,244 5,720,371 7,981,615 Cost of sales - (316,625) (4,672,914) (4,989,539) (2,291,818) (2,291,818) Gross profit 4,551,940 170,950 3,293,958 8,016,848 2,261,244 3,428,553 5,689,797 Administrative (7,095,771) (47,296) (3,284,615) (10,427,682) (4,113,257) (3,238,468) (7,351,725) expenses Other 106,054 - - 106,054 108,198 - 108,198 operating income Operating (2,437,777) 123,654 9,343 (2,304,780) (1,743,815) 190,085 (1,553,730) profit/(loss) 4 EXCEPTIONAL PROFIT ON DEEMED DISPOSAL Audio Visual Machines Limited ('AVM'), a subsidiary of the Group, acquired the entire share capital of the Video Meeting Company Limited on 30 September 2005 for a consideration of £800,000 satisfied by way of shares in Audio Visual Machines Limited. The issue of shares by AVM to the previous owners of VMC resulted in a reduction in the Group's holding in AVM from 77% to 54%. In accordance with FRS 2, the Group has recognised an exceptional profit of £363,715 in the profit and loss account following the reduction of the Group's interest in its subsidiary. Amounts Written off Investments In accordance with the Group's accounting policy, the Group has assessed the fair value of its fixed asset investments at the balance sheet date. The assessment has resulted in a write-off of £2,670,624 (2005: £98,716) to the profit and loss account. 5 ACQUISITIONS AND DISPOSALS On 28 February 2006, The Group acquired the entire share capital of Quayside Corporate Services Limited for a consideration of 90,909,091 shares in The Parkmead Group plc plus a cash payment of an amount equal to the net asset value of Quayside Corporate Services Limited at the date of acquisition being £1,856,835, giving rise to goodwill of £6,073,962. On 23 September 2005 AVM acquired 100% of the Video Meeting Company Limited for a consideration, including costs, of £816,627 satisfied by the issue of 3,067,488 Ordinary B shares of £0.01 p each in AVM. The assets acquired have been included in the Group's balance sheet at their fair value as at the date of acquisition and has given rise to goodwill of £1,428,047. On 16 February 2006, the Group acquired stock of £21,663 and certain contracts of DDI Lizard Limited for a consideration of £264,000. Acquisition costs of £4,000 were incurred and goodwill of £238,337 arose on this transaction. On 29 September 2006 The Parkmead Group plc entered into an agreement to sell its entire shareholding in AVM for a consideration of £1,275,000 before expenses. 6 LOSS PER SHARE The basic loss per share has been calculated by dividing the loss attributable to equity shareholders funds by the weighted average number of shares in issue during the year. The loss and weighted average number of shares used in the calculation of the loss per share are set out below: 2006 2005 Basic loss per share Loss attributable to ordinary shareholders (£) (4,741,702) (355,552) Weighted average number of shares - number 171,332,649 92,425,254 Loss per 5p ordinary share from continuing operations - basic and (0.028p) (0.0038p) diluted Diluted Loss per share Due to the loss in the current and prior year there is no further dilution of the loss per share as a result of the share options in issue. The loss and weighted average number of shares used to calculate the loss per share based on continuing and discontinued operations respectively are set out below: 2006 2005 Basic loss per share from continuing operations Loss attributable to ordinary shareholders (£) (4,741,702) (355,552) Pre-tax losses from discontinued operations (£) (20,679) (188,981) Tax relating to discontinued operations (£) (141,211) 30,766 Losses from continuing operations (£) (4,579,812) (197,377) Weighted average number of shares - number 171,332,649 92,425,254 Loss per 5p ordinary share from continuing operations - basic and (0.027p) (0.0021p) diluted 2006 2005 Basic loss per share from discontinued operations Pre-tax losses from discontinued operations (£) (20,679) (188,981) Tax relating to discontinued operations (£) (141,211) 30,766 Losses from discontinued operations (£) (161,890) (158,215) Weighted average number of shares - number 171,332,649 92,425,254 Loss per 5p ordinary share from discontinued operations- basic and (0.0009p) (0.0017p) diluted 7 RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS 2006 2005 Shareholders funds Shareholders funds £ £ At 1 July 6,274,489 6,293,922 Shares issued - placing 10,000,000 - - EBT and on exercise of options 2,679,181 - - On acquisition of QCS 6,000,001 - Transaction costs (462,500) - Revaluation upwards - 953,305 Temporary diminutions in value of investments - (360,290) Write down of previous revalued investments (1,095,754) (256,896) Currency translation adjustment 9,772 - Loss for the year (4,741,702) (355,352) As at 30 June 18,663,487 6,274,489 8 NOTES TO THE CASH FLOW STATEMENT (a) Reconciliation of operating loss to net cash outflow from operating activities 2006 2005 £ £ Operating loss (2,304,780) (1,553,730) Depreciation 178,770 218,074 Amortisation of intangible assets 426,894 178,408 (Increase) / Decrease in stocks (22,566) 115,800 Increase in debtors (2,973,149) (448,215) Increase in creditors 897,553 398,867 Increase in other provisions 100,000 3,944 Net cash outflow from operating activities (3,697,278) (1,086,852) b) Analysis of cash flows for headings netted in the cash flow statement 2006 2005 £ £ Returns on investments and servicing of finance Interest received 300,353 421,154 Interest paid (301,392) (185,257) Interest element of finance lease rental payments (514) (354) Net cash (outflow) / inflow from returns on investments and servicing of finance (1,553) 235,543 Capital expenditure and financial investment Payments to acquire tangible fixed assets (95,222) (139,616) Payments to acquire fixed asset investments (1,270,505) (733,716) Receipts from sale of tangible fixed assets 3,372 Receipts from sale of fixed assets investments 144,000 7,378 Net cash outflow from capital expenditure and financial investment (1,221,727) (862,582) Acquisitions and disposals Purchase of subsidiary (916,596) (232,091) Deconsolidation of subsidiary (58,575) Cash /(Overdraft) acquired with subsidiary 509,820 (181,048) Net cash outflow from acquisitions (406,776) (471,714) Financing Issue of ordinary share capital 12,679,181 - Less placement expenses (462,500) - Capital element of finance lease rental payments (2,544) (11,063) Decrease in short term borrowings (31,139) (395,563) (Decrease)/ increase in long term borrowings (1,598,579) 295,812 Net cash inflow /(outflow) from financing 10,584,419 (110,814) c) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT At At 1 July 2005 Cash flow Acquisitions Other 30 June 2006 non-cash changes £ £ £ £ £ Cash 886,456 4,811,039 509,820 6,207,315 Overdraft (227,005) 19,694 (207,311) Short term loans (82,934) 31,139 (51,795) Finance lease obligations - 2,544 (9,132) (12,690) (19,278) Long term loans (675,274) 248,579 - (426,695) Loan stock (1,500,000) 1,350,000 (150,000) (1,598,757) 6,462,995 500,688 (12,690) 5,352,236 This information is provided by RNS The company news service from the London Stock Exchange

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