Interim Results

Parity Group PLC 26 September 2006 26 September 2006 Parity Group PLC Interim Results for the six months ended 30 June 2006 Parity Group PLC, the UK IT services group, is pleased to announce interim results for the six months ended 30 June 2006. Financial Highlights: •Revenue from continuing operations up 9% to £73.0m (H1 2005: £67.3m) •Operating profit from continuing operations, before exceptional items and goodwill impairment, of £244,000 (H1 2005: Loss of £1,132,000)) and move into profitability in each division •Profit after tax of £557,000 (H1 2005: Loss of £1,842,000) •Net debt reduced by 75% to £4.8m (December 2005: £19.1m), further to successful placing in April 2006, raising £14.6m net •Net cash outflow for continuing operations reduced by 37% to £1.2m (H1 2005: £1.9m), reflecting careful control of expenditure •New banking facilities secured with RBS Operational Highlights: •Strong growth in Resources, substantially ahead of market rates •Solutions returned to profit, with important new business wins including Northern Ireland Electricity, BAT and Invest Northern Ireland resulting in stronger order book for H2 •Significant improvement in Training with losses eliminated •Completion of overseas disposal programme •Success of streamlining the business into UK-centric operation showing through Commenting on the results Alwyn Welch, Chief Executive, said: 'Overall the group achieved 9% revenue growth, an indication that our renewed business development focus is having the desired impact in the market and that customers remain committed to Parity as a partner and provider. The fact that all three of our lines of business delivered positive operating profit, underlines the improving financial and operating performance in H1 2006. 'Many of the key indicators of the business have improved substantially from a year ago but we must and will remain focussed on continuing the progress we have achieved to date and on creating value for our shareholders.' John Hughes, Chairman, said: 'We have continued to execute the strategy previously set out, and these results provide strong evidence that the steps taken in 2005 are starting to bear fruit. Parity has made substantial progress towards our stated objectives and the business is in a materially stronger financial position.' Enquiries: Parity Group PLC John Hughes, Chairman 020 7832 3500 Alwyn Welch, Chief Executive Officer The Hogarth Partnership John Olsen/Sarah Richardson 020 7357 9477 Notes to editors: Parity Group PLC is a UK-focused IT services company, operating via three core business units - Parity Resources, Parity Solutions and Parity Training. Parity Resources is a leading IT recruitment specialist, with over 30 years experience in providing permanent and contract technology staff, temporary staff and managed recruitment services across all markets. Parity Solutions specialises in providing IT, Projects and Consulting, using leading edge technologies and drawing upon the depth of experience of its consultants in Programme and Project Management. Parity Training is one of the UK's leading Management and IT training providers. In addition to a comprehensive schedule of public courses, Parity delivers tailored learning solutions and customised programmes for major clients. Parity is listed on the London Stock Exchange, with a ticker of PTY.LN. Chairman's Statement Introduction The first half of 2006 has provided strong evidence that the steps taken in 2005 are starting to bear fruit. The company has made substantial progress towards our stated objectives and the business is in a materially stronger financial position. Group trading was in line with, or slightly ahead of, expectations in each of the business lines. The Resources business demonstrated strong growth, substantially above market rates whilst at the same time improving margins. The Training business exhibited a significant turnaround with improved margins on, as expected, modestly lower turnover. The Solutions business achieved a positive operating profit and also saw an acceleration in new orders which will translate into revenue and margin growth in H2. Overall the group achieved 9% revenue growth, an indication that our renewed business development focus is having the desired impact in the market and that customers remain committed to Parity both as a partner and as a provider. The fact that all three of our lines of business delivered positive operating profit performance underlines the improving financial and operating performance in H1 2006. Group operating profit from continuing operations before exceptional items and goodwill impairment was £244,000 as compared to a loss of £1,132,000 in H1 2005, and a loss of £399,000 in H2 2005. The Group's headline post-tax profit of £557,000 (H1 2005: loss of £1,842,000) was achieved as a result of substantial gains on disposal offset by associated restructuring charges. Business focus and strategy We have continued to execute the strategy outlined over the past fifteen months, maintaining a clear focus on the UK and Irish markets. From an operational perspective we are aiming to reach median or above margins in each business unit whilst ensuring that we develop increased flexibility in our cost structure. We also continue to focus on the disposal of excess facilities, where we continue to make progress. In both Resources and Solutions, our focus remains on securing profitable business while continuing to invest in our sales capability - all of which is designed to secure continued revenue growth and margin improvement. Key wins in H1 included winning frameworks with Catalist and the NHS alongside many smaller wins across a number of clients in Resources; a £1.0m project in Training for a large insurance company to assist in a major business change programme; and in Solutions, a systems integration project valued at an initial £1.5m with Northern Ireland Electric, a £3-6m applications management and development contract with BAT, and a people development programme for Invest Northern Ireland valued at £3m over 3 years. As well as this major focus on business development, management remains heavily focused on managing our cash resources, despite demands of the growing Resources business. Management team and Board of Directors Changes to the leadership team are now substantially complete. In February 2006 Alwyn Welch was recruited as the Group's new Chief Executive, and he is already making a positive difference in all areas of the business. During the period, we made two internal appointments, Joe Kelly became Group Finance Director and David Conkleton was appointed Managing Director of Solutions. In June, the Board was further strengthened by the appointment of Nigel Tose as a Non-Executive Director and Chairman of the Audit Committee. Balance sheet strengthened In April the Group successfully completed a share placing and open offer, raising £14.6 million net (£16 million gross) with good support from our existing shareholders and a number of new institutions joining the share register. Upon completion of the fundraising the Group has successfully secured new banking facilities on significantly better terms than previously, providing a facility appropriate in both type and scale to support the needs of the business as it recovers and grows. Cash flow and net debt The net cash outflow from continuing operating activities was £1,201,000 during the period (H1 05: outflow of £1,875,000). This included a cash outflow for exceptional costs recorded in prior years of £1,371,000 (H1 05: outflow of £1,583,000 for exceptional items). Net debt as at 30 June 2006 was £4.8 million, a decrease of £14.2 million from 31 December 2005. Tax The tax credit on continuing operations for the period was £81,000 (H1 05: £174,000) on a Group loss on continuing operations before tax of £1,317,000 (H1 05: £2,002,000). The tax credit represents an effective tax rate of 6.2% compared to the UK statutory rate of 30% due to the fact that a deferred tax asset has not been recognised in respect of certain tax losses, largely relating to central costs, and also due to temporary timing differences. Disposals and exceptional item In January, the Group successfully completed the disposal of the major elements of its continental European business to GFT, and in May disposed of the remaining Benelux business. These disposals were in line with our strategy of streamlining the business to focus on the UK and Ireland. All legacy costs associated with the disposed business have been provided for in H1 2006. It is Group strategy that all remaining legal entities associated with these businesses be closed as soon as practicable. As a result of these disposals a one-off net gain on disposal of £2.0m was booked in the period. A further exceptional charge of £600,000 was made for one empty property in the UK, where it has become clear that the provisions made in previous years would be insufficient given the current commercial property market in that locality. Dividend No interim dividend is payable in respect of the year ending 31 December 2006 (2005: final dividend £nil; interim dividend £nil). Market conditions and outlook The overall outlook for the markets Parity serves remains modestly positive. The market and outlook for our Resources business remains good, especially for more senior roles in which Parity specialises, although we continue to see price pressure in the commercial sector, despite some skill shortages. Based on continuing demand in the skills areas on which we are focused, we expect to see continued revenue growth in H2, and with an increased focus on margin improvement which should start to show benefits in 2007. The Training market remains very price sensitive, but the decline in overall market size seen in previous periods appears to have halted. We do not expect to see major changes in the performance of the Training business. Our focus remains on earnings rather than top line growth and work continues to improve both the product mix and its associated profit margin as well as our sales channels, in order to deliver modest improvements in future periods allied to a more predictable business. The Solutions market, whilst remaining competitive, is healthy overall and even strong in some segments such as parts of Public Sector, but with some skills shortages increasing costs. Our Solutions order book built to date this year is expected to lead to above market growth rates in the second half and into 2007. Furthermore we are expecting gradual margin improvement as utilisation levels reach our target in H2. Management remains focussed on continuing the improvement in the Group's operational and financial performance. The results for H2 will further benefit from lower interest charges for the entire period, as a result of the fundraising. Based on higher operating profit and lower interest, we aim to deliver positive PBT in H2. Many of the key indicators of the business have improved substantially from a year ago but we must and will remain focussed on continuing the progress we have achieved to date and on creating value for our shareholders. Financial summary _______________________________________________________________________________ Six months Six months Year ended to 30.6.06 to 30.6.05 31.12.05 (unaudited) (unaudited) (audited - £'000 £'000 see note 1) £'000 _______________________________________________________________________________ Revenue from continuing operations 73,018 67,252 135,256 Operating profit (loss) from continuing operations before exceptional items and goodwill impairment 244 (1,132) (1,531) Operating (loss) from continuing operations (356) (1,132) (6,321) (Loss) before taxation from continuing operations (1,317) (2,002) (8,256) Profit (loss) for the period 557 (1,842) (9,222) Net debt (4,812) (15,473) (19,052) Equity shareholders' funds (deficit) 11,099 2,960 (4,090) _______________________________________________________________________________ Pence Pence Pence _______________________________________________________________________________ Loss per share from continuing operations Basic (6.95) (25.71) (108.04) Diluted (6.95) (25.71) (108.04) Earnings (loss) per ordinary share Basic 3.13 (25.91) (129.73) Diluted 3.13 (25.91) (129.73) _______________________________________________________________________________ Divisional performance - continuing operations Six months to Six months to Year to 30.06.06 30.06.05 31.12.05 (unaudited) (unaudited) (audited - see note 1) Revenue Profit Revenue Profit Revenue Profit £'000 before £'000 (loss) £'000 (loss) taxation before before taxation taxation £'000 £'000 £'000 _______________________________________________________________________________________ Business Solutions 10,058 73 12,147 35 22,587 21 Training 9,223 94 10,437 (695) 20,044 (1,161) Resources 53,737 1,401 44,668 589 92,625 2,011 _______________________________________________________________________________________ Operating profit (loss) before central costs, exceptional items and goodwill impairment 1,568 (71) 871 Central costs (1,324) (1,061) (2,402) Operating profit (loss) before exceptional items and goodwill impairment 244 (1,132) (1,531) Net finance costs (961) (870) (1,935) Impairment of goodwill - - (2,500) _______________________________________________________________________________________ Loss before tax, and exceptional items (717) (2,002) (5,966) Exceptional (costs) (600) - (2,290) _______________________________________________________________________________________ 73,018 (1,317) 67,252 (2,002) 135,256 (8,256) _______________________________________________________________________________________ Geographical performance - continuing operations Six months to Six months to Year to 30.06.06 30.06.05 31.12.05 (unaudited) (unaudited) (audited - see note 1) Revenue Operating Revenue Operating Revenue Operating £'000 profit £'000 profit (loss) £'000 profit (loss) before before before central central central costs and costs and costs and exceptional exceptional exceptional items items items £'000 £'000 £'000 __________________________________________________________________________________________ United Kingdom 72,743 1,568 66,880 (72) 134,501 881 Ireland 275 - 372 1 755 (10) __________________________________________________________________________________________ 73,018 1,568 67,252 (71) 135,256 871 __________________________________________________________________________________________ Consolidated Income Statement (Unaudited) For the Six Months Ended 30 June 2006 Notes Six months to Six months to Year to 30.06.06 30.06.05 31.12.05 (unaudited) (unaudited) (audited - see note 1) £'000 £'000 £'000 _______________________________________________________________________________ Continuing operations Revenue 2 73,018 67,252 135,256 _______________________________________________________________________________ Employee benefit costs (10,975) (11,436) (23,305) Depreciation (303) (386) (751) All other operating expenses (61,496) (56,562) (112,731) _______________________________________________________________________________ Total operating expenses before exceptional items and impairment of goodwill (72,774) (68,384) (136,787) _______________________________________________________________________________ _______________________________________________________________________________ Operating profit (loss) before exceptional items and impairment of goodwill 2 244 (1,132) (1,531) _______________________________________________________________________________ Exceptional operating expenses 3 (600) - (2,290) Impairment of goodwill - - (2,500) _______________________________________________________________________________ Total operating expenses (73,374) (68,384) (141,577) _______________________________________________________________________________ Operating loss (356) (1,132) (6,321) Finance income 4 - - 5 Finance costs 5 (961) (870) (1,940) _______________________________________________________________________________ Loss before tax (1,317) (2,002) (8,256) Tax 6 81 174 576 _______________________________________________________________________________ Loss for the period from continuing operations (1,236) (1,828) (7,680) _______________________________________________________________________________ Discontinued operations Profit (loss) for the period from discontinued operations 7 1,793 (14) (1,542) _______________________________________________________________________________ Profit (loss) for the period attributable to equity shareholders 12 557 (1,842) (9,222) _______________________________________________________________________________ Earnings (loss) per share expressed in pence per share Basic and diluted 8 3.13p (25.91p) (129.73p) Earning (loss) per share from continuing operations Basic and diluted 8 (6.95p) (25.71p) (108.04p) Consolidated Balance Sheet (Unaudited) As at 30 June 2006 Notes As at As at As at 30.06.06 30.06.05 31.12.05 (unaudited) (unaudited) (audited - see note 1) £'000 £'000 £'000 _______________________________________________________________________________ Non-current assets Goodwill 7,116 9,616 7,116 Property, plant and equipment 697 1,538 988 Available for sale financial assets 30 30 30 Deferred tax assets 5,160 5,640 4,954 _______________________________________________________________________________ 13,003 16,824 13,088 _______________________________________________________________________________ Current assets Inventories 1,146 1,459 1,323 Trade and other receivables 34,572 42,004 35,539 Current tax assets - 15 24 Cash and cash equivalents 10 1,785 1,935 749 _______________________________________________________________________________ 37,503 45,413 37,635 _______________________________________________________________________________ Assets classified as held for sale and included in disposal groups - - 8,746 _______________________________________________________________________________ Total assets 50,506 62,237 59,469 _______________________________________________________________________________ Current liabilities Financial liabilities 10 (2,086) (3,878) (18,039) Trade and other payables (24,092) (33,138) (29,550) Current tax liabilities (252) - (216) Provisions (1,743) (1,215) (1,718) _______________________________________________________________________________ (28,173) (38,231) (49,523) _______________________________________________________________________________ Non-current liabilities Financial liabilities 10 (4,511) (13,530) (19) Provisions (2,103) (2,508) (2,129) Retirement benefit liability 14 (4,620) (5,008) (4,657) _______________________________________________________________________________ (11,234) (21,046) (6,805) _______________________________________________________________________________ Liabilities classified as held for sale and included in disposal groups - - (7,231) _______________________________________________________________________________ Total liabilities (39,407) (59,277) (63,559) _______________________________________________________________________________ Net assets (liabilities) 11,099 2,960 (4,090) _______________________________________________________________________________ Shareholders' equity (deficit) Called up share capital 12, 13 15,075 14,434 14,434 Share premium account 12 20,055 6,062 6,062 Other reserves 12 44,160 44,160 44,160 Retained earnings 12 (68,191) (61,696) (68,746) _______________________________________________________________________________ Total shareholders' equity (deficit) 11,099 2,960 (4,090) _______________________________________________________________________________ Consolidated Statement of Recognised Income and Expense (Unaudited) For the Six Months Ended 30 June 2006 Six months to Six months to Year to 30.06.06 30.06.05 31.12.05 (unaudited) (unaudited) (audited - see note 1) £'000 £'000 £'000 ______________________________________________________________________________________ Exchange differences on translation of foreign operations 8 40 178 Actuarial losses on defined benefit pension schemes - (436) (263) Deferred taxation on items taken directly to equity - 131 79 ______________________________________________________________________________________ Net income (expense) recognised directly in equity 8 (265) (6) Profit (loss) for the period 557 (1,842) (9,222) ______________________________________________________________________________________ Total recognised income (expense) for the period 565 (2,107) (9,228) ______________________________________________________________________________________ Consolidated Cash Flow Statement (Unaudited) For the Six Months Ended 30 June 2006 Notes Six months to Six months to Year to 30.06.06 30.06.05 31.12.05 (unaudited) (unaudited) (audited - £'000 £'000 see note 1) £'000 ________________________________________________________________________________ Cash flows from operating activities Cash used in operations 11 (4,256) (1,831) (4,460) Interest received - - 23 Interest paid (615) (582) (1,417) Tax received - 536 585 ________________________________________________________________________________ Net cash used in operations (4,871) (1,877) (5,269) ________________________________________________________________________________ Cash flows from investing activities Purchase of property, plant and equipment (74) (76) (327) Proceeds from disposal of property, plant and equipment - 18 155 Proceeds from sale of subsidiary undertakings 4,649 - - ________________________________________________________________________________ Net cash from (used in) investing activities 4,575 (58) (172) ________________________________________________________________________________ Cash flows from financing activities Net cash from issue of ordinary shares 14,634 - - Repayment of loan notes - (6) (6) Net cash relating to borrowings (16,250) 1,637 4,947 Payment of capital element of finance leases (9) (10) (20) Equity dividends paid - - - ________________________________________________________________________________ Net cash (used in) from financing activities (1,625) 1,621 4,921 ________________________________________________________________________________ Net decrease in cash and cash equivalents (1,921) (314) (520) Cash and cash equivalents at beginning of the period 1,738 2,175 2,175 Net foreign exchange difference (98) 74 83 ________________________________________________________________________________ Cash and cash equivalents at end of the period 10 (281) 1,935 1,738 ________________________________________________________________________________ Cash and cash equivalents consist of: - Cash 1,785 1,935 749 - Overdrafts (2,066) - - - Cash and cash equivalents held in assets classified as held for sale and included in disposal groups - - 989 ________________________________________________________________________________ 10 (281) 1,935 1,738 ________________________________________________________________________________ For the purposes of the cash flow statement, cash and cash equivalents are net of overdrafts. These overdrafts are excluded from the definition of cash and cash equivalents in the balance sheet. Notes to the Interim Results (Unaudited) 1 Basis of preparation The financial information comprises the unaudited results for the six months to 30 June 2006 and 30 June 2005 and the results for the twelve months ended 31 December 2005. The results for the twelve months ended 31 December 2005 included in this report do not constitute statutory accounts for the purpose of section 240 of the Companies Act 1985. A copy of the statutory accounts for the twelve months ended 31 December 2005, on which an unqualified report has been made by the auditors, prior to the restatement for the matter below and which did not contain a statement under section 237 (2)-(3) of the Companies Act 1985, has been delivered to the Registrar of Companies. Figures for the six months to 30 June 2005 contained in the consolidated income statement and related notes have been restated to present the US, German, French, Belgian, Dutch and Swiss operations within discontinued operations. Figures for the year to 31 December 2005 contained in the consolidated income statement and related notes have been restated to present the Belgian, Dutch and Swiss operations within discontinued operations. Accounting policies This interim report has been prepared on the basis of the accounting policies set out in the Group financial statements for the twelve months ended 31 December 2005 and on the basis of the International Financial Reporting Standards (IFRS) as adopted for use in the EU that the Group expects to be applicable as at 31 December 2006. IFRS are subject to amendment and interpretation by the International Accounting Standards Board (IASB) and there is an ongoing process of review and endorsement by the European Commission. Notes continued 2 Segmental analysis The Group is organised into three primary business segments: Business Solutions, Training and Resources. Six months to Six months to Year to 30.06.06 30.06.05 31.12.05 (unaudited) (unaudited) (audited - see note 1) £'000 £'000 £'000 _______________________________________________________________________________ Revenue - continuing operations Business Solutions 10,058 12,147 22,587 Training 9,223 10,437 20,044 Resources 53,737 44,668 92,625 _______________________________________________________________________________ 73,018 67,252 135,256 _______________________________________________________________________________ Revenue - discontinued operations Resources 3,339 21,538 41,383 _______________________________________________________________________________ Operating result before Exceptional items Operating result after exceptional items exceptional items Six Six Year Six Six Year Six Six Year months months to months months to months months to to to 31.12.05 to to 31.12.05 to to 31.12.05 30.06.06 30.06.05 (audited - 30.06.06 30.06.05 (audited - 30.06.06 30.06.05 (audited - see (unaudited) (unaudited) see note 1) (unaudited) (unaudited) (unaudited) (unaudited) see note 1) note 1) £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 ________________________________________________________________________________________________________________________ Continuing operations 73 35 21 - - (607) 73 35 (586) Business Solutions Training 94 (695) (1,161) - - (1,007) 94 (695) (2,168) Resources 1,401 589 2,011 - - 5 1,401 589 2,016 ________________________________________________________________________________________________________________________ 1,568 (71) 871 - - (1,609) 1,568 (71) (738) ________________________________________________________________________________________________________________________ Central (1,324) (1,061) (2,402) (600) - (681) (1,924) (1,061) (3,083) costs Impairment of goodwill - - (2,500) - - - - - (2,500) ________________________________________________________________________________________________________________________ 244 (1,132) (4,031) (600) - (2,290) (356) (1,132) (6,321) ________________________________________________________________________________________________________________________ Notes continued 3 Exceptional items Six months to Six months to Year to 30.06.06 30.06.05 31.12.05 (unaudited) (unaudited) (audited - £'000 £'000 see note 1) £'000 _______________________________________________________________________________ Continuing operations Redundancy payments - - (483) Property restructuring (600) - (573) Network and IT support services exit costs - - (1,234) _______________________________________________________________________________ Total exceptional items from continuing operations (600) - (2,290) _______________________________________________________________________________ Six months to Six months to Year to 30.06.06 30.06.05 31.12.05 (unaudited) (unaudited) (audited - £'000 £'000 see note 1) £'000 _______________________________________________________________________________ Discontinued operations Redundancy payments - - (60) Property restructuring - - (287) Disposal of subsidiary 2,046 - - undertakings Other - - (216) _______________________________________________________________________________ Total exceptional items from discontinued operations 2,046 - (563) _______________________________________________________________________________ 4 Finance income Six months to Six months to Year to 30.06.06 30.06.05 31.12.05 (unaudited) (unaudited) (audited - £'000 £'000 see note 1) £'000 _______________________________________________________________________________ Bank interest receivable - - 5 _______________________________________________________________________________ Total finance income - - 5 _______________________________________________________________________________ Notes continued 5 Finance costs Six months to Six months to Year to 30.06.06 30.06.05 31.12.05 (unaudited) (unaudited) (audited - £'000 £'000 see note 1) £'000 _______________________________________________________________________________ Bank interest payable 595 523 1,246 Post retirement benefits 346 344 692 Other interest payable 20 3 2 _______________________________________________________________________________ Total finance costs 961 870 1,940 _______________________________________________________________________________ 6 Tax Six months to Six months to Year to 30.06.06 30.06.05 31.12.05 (unaudited) (unaudited) (audited - £'000 £'000 see note 1) £'000 _______________________________________________________________________________ Current tax (88) 96 879 Deferred tax - (188) 193 _______________________________________________________________________________ Total tax (credit) charge (88) (92) 1,072 _______________________________________________________________________________ Six months to Six months to Year to 30.06.06 30.06.05 31.12.05 (unaudited) (unaudited) (audited - £'000 £'000 see note 1) £'000 _______________________________________________________________________________ Continuing operations (81) (174) (576) Discontinued operations (7) 82 1,648 _______________________________________________________________________________ Total tax (credit) charge (88) (92) 1,072 _______________________________________________________________________________ The tax (credit) charge above includes a £180,000 tax credit for the six months ended 30 June 2006 (£nil for the six months ended 30 June 2005 and £616,000 credit for the year ended 31 December 2005) arising in respect of exceptional items Notes continued 7 Discontinued operations Six months to Six months to Year to 30.06.06 30.06.05 31.12.05 (unaudited) (unaudited) (audited - £'000 £'000 see note 1) £'000 _______________________________________________________________________________ Pre-tax (loss) profit from discontinued operations (391) 68 (82) _______________________________________________________________________________ Gain on disposal of US subsidiary net tangible assets 131 - 188 Gain on disposal of European subsidiary net tangible assets 2,046 - - Taxation 7 (82) (1,648) _______________________________________________________________________________ Net profit (loss) on disposal 2,184 (82) (1,460) _______________________________________________________________________________ Total 1,793 (14) (1,542) _______________________________________________________________________________ 8 Earnings (loss) per Ordinary share The calculation of the earnings (loss) per Ordinary share is based on a profit after taxation of £557,000 (30 June 2005: £1,842,000 loss, 31 December 2005: £9,222,000 loss). The calculation of the loss per share before discontinued operations and exceptional items (see the financial summary on page 2) is based on a loss after taxation of £816,000 (30 June 2005: £1,828,000 loss, 31 December 2005: £6,006,000 loss). Supplementary basic and diluted earnings per share have been calculated to exclude the effect of exceptional items and discontinued operations. The adjusted numbers have been shown in the financial summary in order that the effects of exceptional items and discontinued operations on reported earnings can be fully appreciated. Earnings (loss) per share on Six months to Six months to Year to discontinued operations 30.06.06 30.06.05 31.12.05 (unaudited) (unaudited) (audited - see note 1) _______________________________________________________________________________ Basic 10.08p (0.20p) (21.69p) Diluted 10.08p (0.20p) (21.69p) _______________________________________________________________________________ Notes continued 8 Earnings (loss) per Ordinary share continued The weighted average number of Ordinary shares used in the calculation of the basic and diluted earnings (loss) per share are as follows: Six months to Six months to Year to 30.06.06 30.06.05 31.12.05 (unaudited) (unaudited) (audited - £'000 £'000 see note 1) £'000 _______________________________________________________________________________ Basic Weighted average number of fully paid Ordinary shares in issue during the period 16,925,330 5,773,833 5,773,833 Weighted average number held by ESOP trust (50,822) (55,124) (55,124) Adjustment for the effect of the issue of new shares under the exercise of rights (see note 13) 906,200 1,389,969 1,389,969 _______________________________________________________________________________ Adjusted weighted average number of fully paid Ordinary shares in issue during the period 17,780,708 7,108,678 7,108,678 _______________________________________________________________________________ Dilutive Weighted average number of fully paid Ordinary shares in issue during the period 16,925,330 5,773,833 5,773,833 Dilutive effect of potential - - - ordinary shares Weighted average number held by ESOP trust (50,822) (55,124) (55,124) Adjustment for the effect of the issue of new shares under the exercise of rights (see note 13) 906,200 1,389,969 1,389,969 Adjusted diluted weighted average number of fully paid Ordinary shares in issue during the period 17,780,708 7,108,678 7,108,678 Number of issued Ordinary shares at the end of the period 37,812,260 5,773,833 5,773,833 _______________________________________________________________________________ The weighted average number of Ordinary shares and the issued Ordinary shares for prior periods have been restated to reflect the impact of the capital reorganisation (see note 13). Basic earnings (loss) per share is calculated by dividing the basic earnings for the period by the weighted average number of fully paid ordinary shares in issue during the period, less those shares held by the ESOP Trust. Diluted earnings (loss) per share is calculated on the same basis as the basic earnings (loss) per share with a further adjustment to the weighted average number of fully paid ordinary shares to reflect the effect of all potentially dilutive ordinary shares. All options granted by the Group have exercise prices that are above the average price of the Company's ordinary shares for the six months to 30 June 2006. Since it is appropriate to assume that option holders would act rationally, no adjustment has been made to diluted EPS for share options with an exercise price in excess of the market price at the period end. Notes continued 9 Consolidated reconciliation of net cash flow to movement in net debt Six months to 30.06.06 (unaudited) £'000 _______________________________________________________________________________ Decrease in cash and overdrafts in the period (1,921) Decrease in cash and overdrafts in the period due to foreign exchange movements (98) Decrease in bank loans and other bank borrowings 16,250 Repayment of obligations under finance leases 9 _______________________________________________________________________________ Movement in net debt in the period 14,240 Net debt at 1 January 2006 (19,052) _______________________________________________________________________________ Net debt at 30 June 2006 (4,812) _______________________________________________________________________________ 10 Analysis of net borrowings 01.01.06 Cash flow Exchange 30.06.06 £'000 £'000 movements £'000 £'000 ______________________________________________________________________________ Cash and cash equivalents Cash at bank and in hand 1,738 145 (98) 1,785 Overdrafts - (2,066) - (2,066) ______________________________________________________________________________ 1,738 (1,921) (98) (281) ______________________________________________________________________________ Borrowings Bank loans (17,500) 13,000 - (4,500) Other bank borrowings (2,676) 2,676 - - Invoice factoring facility (574) 574 - - Obligations under finance leases (40) 9 - (31) ______________________________________________________________________________ Net Borrowings (19,052) 14,338 (98) (4,812) ______________________________________________________________________________ Cash and cash equivalents includes cash held in assets classified as held for sale and included in disposal groups of £nil (1 January 2006 £989,000). Borrowings includes other bank borrowings and invoice factoring facilities of £nil (1 January 2006 £2,157,000) and £nil (1 January 2006 £574,000) respectively, held in liabilities classified as held for sale and included in disposal groups. Notes continued 11 Reconciliation of operating loss after tax to net cash flow Continuing operations Six months to Six months to Year to 30.06.06 30.06.05 31.12.05 (unaudited) (unaudited) (audited - £'000 £'000 see note 1) £'000 _______________________________________________________________________________ Net loss for the period (1,236) (1,828) (7,680) Adjustments for: Tax (81) (174) (576) Depreciation 303 386 945 Equity settled share based payments (10) 70 141 Impairment of goodwill - - 2,500 Loss (profit) on disposal of tangible fixed assets 62 (6) 18 Interest income - - (5) Interest expense 961 870 1,940 Changes in working capital Decrease in work in progress 177 205 341 Decrease (increase) in trade and other receivables 806 (967) (3,178) (Decrease) increase in trade and other payables (2,070) 759 2,634 Decrease in provisions (1) (655) (751) Change in retirement benefit liability * (112) (535) (1,123) _______________________________________________________________________________ Cash used in continuing operations (1,201) (1,875) (4,794) _______________________________________________________________________________ Discontinued operations _______________________________________________________________________________ Net profit (loss) for the period 1,793 (14) (1,542) Adjustments for: Tax (7) 82 1,648 Depreciation - 69 94 Loss (profit) on disposal of tangible fixed assets 26 (1) 23 (Profit) on disposal of discontinued operations (2,046) - - Interest income - - (18) Interest expense - 79 236 Changes in working capital Decrease (increase) in trade and other receivables 764 (634) 320 (Decrease) increase in trade and other payables (3,585) 463 (660) Increase in provisions - - 233 _______________________________________________________________________________ Cash (from) used in discontinued operations (3,055) 44 334 _______________________________________________________________________________ Total net cash flow from operating activities (4,256) (1,831) (4,460) _______________________________________________________________________________ * Excludes finance cost which is shown in interest expense. Cash generated from operations includes cash outflows relating to exceptional items recorded in prior years of £1,371,000 (30 June 2005: outflow of £1,583,000; 31 December 2005: outflow of £2,663,000) Notes continued 12 Statement of changes in shareholders' equity (deficit) Share Deferred Share Other Retained Total capital Shares premium reserves earnings £'000 £'000 £'000 reserve £'000 £'000 £'000 ________________________________________________________________________________ At 1 January 2006 14,434 - 6,062 44,160 (68,746) (4,090) Net profit for the period - - - - 557 557 Capital restructure (14,319) 14,319 - - - - Issue of new shares (see note 13) 641 - 13,993 - - 14,634 Share options - value of employee services - - - - (10) (10) Net gain recognised directly in equity - - - - 8 8 ________________________________________________________________________________ At 30 June 2006 756 14,319 20,055 44,160 (68,191) 11,099 ________________________________________________________________________________ 13 Issue of new shares On 30 March 2006 the Company published a prospectus in respect of the fully underwritten issue of a Firm Placing of 16,000,000 New Ordinary Shares and a Placing and Open Offer of 16,038,427 New Ordinary Shares to qualifying shareholders holding ordinary shares at the close of business on 29 March 2006. A capital reorganisation was also proposed to subdivide and redesignate each Ordinary share of 5p into one ordinary share of 2p and 124 deferred shares. Shareholder approval for the issue and capital reorganisation was sought and received at an extraordinary general meeting held on 24 April 2006. In order to issue shares at below the pre-existing nominal price of 5p the company completed a capital reorganisation on 28 April 2006 such that: • Each issued ordinary share of 5p was redesignated into one ordinary share of 2p • Every 50 shares were consolidated into one New ordinary share and 124 deferred shares. • Every 2 unissued ordinary shares of 5p were redesignated into 5 New ordinary shares. Deferred shares are not listed on the London Stock Exchange; have no voting rights, no rights to dividends and the right only to a very limited return on capital in the event of liquidation. Net proceeds from this firm placing and placing and open offer amounted to £14,634,000. 14 Post retirement benefits The Group provides employee benefits under various arrangements, including through defined benefit and defined contribution pension plans, the details of which are disclosed in the 2005 Annual Report and Accounts. At the interim balance sheet date, the assets and liabilities of the principal defined benefit plans have been updated from the latest actuarial valuations and no material differences were identified. This information is provided by RNS The company news service from the London Stock Exchange
UK 100

Latest directors dealings