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.
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