Final Results
RWS Holdings PLC
05 January 2005
Embargoed Until 0700 5 January 2005
RWS Holdings plc
Preliminary results for the year ended 30 September 2004
--------------------------------------------------------------------------------
RWS Holdings plc today announced its preliminary results for the year ended 30
September 2004.
Financial Highlights:
---------------------
• Sales and profits at record levels
• Sales increased by 14% to £31.1 million
• Profit before tax rose by 8% to £6 million, despite adverse currency factors
(before goodwill amortization and exceptional items)
• Basic earnings per share were 12.2p
(before goodwill amortization and exceptional items)
• Proposed final dividend of 3.5p per share making 5p for the year, 47% more
than forecast at flotation
• Strong cash generation from operations with net cash at 30 September of
£10.7 million
Operational Highlights:
-----------------------
• Strong growth by patent translations business as clients' need to
protect intellectual property assumes ever increasing importance
• Record levels of productivity
• Significant new client wins
• Increased workflow from current clients
• Launch of Patbase, a major electronic patent database
• Good progress by our Japanese business
• The addition of ten new accession states to the European Union is
expected to add further demand
Outlook:
--------
Commenting on the results, Executive Chairman Andrew Brode said:
'RWS has performed well in its maiden year as a public company, delivering
record results. Demand for our core business remains strong and is underpinned
by significant new clients and record numbers of granted patents.
With much of our currency exposure in 2004/05 now hedged and a solid order book
in place, I am confident that RWS will be able to build upon these results.'
Explanatory note
----------------
The statutory comparatives for the period are those of the Bybrook Limited group
before the reverse acquisition that was completed on 11 November 2003. These are
for a 6 month period to 30 September 2003 as Bybrook changed its year end from
31 March to 30 September following the reversal.
To afford meaningful year on year comparison and so as to show the momentum of
progress in the business it has been necessary to produce pro forma figures for
sales and profit before tax, goodwill amortization and exceptional items for the
year ended 30 September 2003 based on management accounts excluding discontinued
operations.
The unaudited pro forma sales for the year ended 30 September 2003 was £27.3
million and the unaudited pro forma profit before tax, goodwill amortization and
exceptional items for the year ended 30 September 2003 was £5.5 million.
Comparisons of the current year performance against these pro forma figures are
contained in the Preliminary Announcement and the Executive Chairman's
Statement.
For further information contact:
RWS Holdings plc
Andrew Brode, Executive Chairman 01753 480200
Weber Shandwick Square Mile
Nick Oborne 020 7067 0721
About RWS:
RWS is a leading provider of intellectual property support services (patent
translations and technical searches) to the medical, pharmaceutical, chemical,
aerospace, defence, automotive and telecoms industries. RWS also provides
specialist technical, legal and financial translation services for areas of
industry outside the patent arena. RWS is based in the UK, with offices in
Europe, New York and Tokyo.
Approximately 1,000,000 patent documents are published per annum, 200,000 of
which are published in Europe (Source: European Patent Office) and the
intellectual property market has shown significant growth in recent years, with
patent applications in Europe having doubled over the last ten years.
For further information please visit: www.rws.com
RWS Holdings plc
Preliminary Results 2004
Executive Chairman's Statement
--------------------------------------------------------------------------------
It is great pleasure for me to present the first results of your Company
following its successful flotation on AIM on 11 November 2003. The flotation was
achieved via the reverse takeover of Health Media Group plc at a price of
112.54p per share.
Overview of the Business
RWS is a leading provider of intellectual property support services and
specialist technical, legal and financial translation services. The Directors
believe that it is the largest patent translation specialist in Europe,
translating over 30,000 patents and intellectual property related documents per
annum, with its other major markets being the US and Japan. It serves an
international blue chip client base including companies in the medical,
pharmaceutical, chemical, aerospace, defence, automotive and telecoms industries
as well as patent agents. It comprises two divisions, the RWS Translation
division, which provides patent and documentation translation, filing and
localization services and the RWS Information division, which offers a
comprehensive range of patent search, retrieval and monitoring services.
Strategy
The Group's strategy is to grow organically through the exploitation of its
leading position and reputation in the delivery of translation and search
services. In addition selective acquisition opportunities will be considered to
enhance growth and shareholder value.
Results
During the year the Group continued to make good progress, building on its
leading positions in growing markets and the quality of its operations.
Sales and profits for the year were both at record levels. On a like for like
basis sales grew by 14% to £31.1 million; profit before tax, goodwill
amortization and exceptionals reached £6 million, an 8% rise on the 2003 figure.
The continued improvement in sales, especially within the core translation
activities, reflect both increased work flow from existing clients and business
from new clients. These characteristics underpin the outlook for 2005.
Whilst Europe is always likely to be the Group's principal market, we also
achieved noteworthy growth in sales and profits in Japan.
The 2004 results are complicated by the accounting principles required for
reverse acquisition accounting and impacted by the significant exceptional costs
associated with the flotation itself. The effective rate of corporation tax was
7%, substantially lower than the standard rate of 30% due mainly to the impact
of a one-off tax credit relating to prior year losses in the US business, which
has now been disposed of.
Dividend
The Board has recommended a final dividend of 3.5p per share, which, together
with the interim dividend, will result in a total first year dividend of 5p per
share. In the admission document we signalled a yield of 3% on the then market
capitalisation; the proposed total dividend represents a yield of 4.4% on the
flotation price and 2.6% on the market price at 31 December 2004.
Operating Review
The UK operations are to be congratulated on winning their third Queen's Award
for Enterprise - International Trade, in respect of their outstanding export
record.
Translations
------------
Our clients' need to protect their intellectual property assumes ever increasing
importance.
The Company's core patent translations business has continued to grow,
influenced by the twin drivers of record numbers of granted patents and demand
from a wide cross section of the world's multinational corporations who value
our cost effective and highly professional services. Our Japanese patent
translation and filing services have also performed well and are attractive to
our international clients. The addition of ten new accession states to the
European Union will undoubtedly add a further demand stimulus.
Our commercial and technical translation services, which account for 10% of
sales, have faced intense competition. We are unwilling to dilute the quality of
our offering or the associated financial margin and, where price is more
important to a potential client than quality, RWS is unlikely to be selected.
Information
-----------
The Information Search division, which accounts for less than 10% of group
sales, experienced a marked downturn in demand for its core patent search
services during the second half, caused in part by unfavourable economic
conditions resulting in corporates reining back the search element of their
research and development programmes. We expect to partially offset this decline
following the successful launch of Patbase, which is believed to be the world's
largest patent database. We are actively marketing subscriptions and the initial
trial feedback has been encouraging.
Financial Review
The financial position of the Company is strong with net assets of £12.6
million, including net cash of £10.7 million. Cash inflow from operations was
£5.3 million, before exceptionals of £1.7 million principally associated with
the flotation. Overall net cash inflow amounted to £9.5 million. Capital
expenditure and working capital requirements continued to be modest.
As of 31 December 2003, the Company redeemed all of the loan notes remaining as
the result of a prior business disposal. The cash thereby realised was first
utilised to pay down bank debt, with the surplus forming a part of the Company's
cash balances referred to above. Any capital gains tax payable as a result of
this redemption is fully provided for.
The most significant currency pair for the business is Euro/Sterling with
approximately half of total sales transacted in Euros; conversely, much of the
cost base is Sterling denominated. During the second half of the year the
Company was unhedged in anticipation of Euro strengthening; forward contracts
have now been entered into covering much of the Euro exposure to the end of
September 2005, at a rate of 69.5.
People
The year has seen much change and progress. On admission to AIM we welcomed to
the Board John Ivey as Senior Non-Executive Director, and Elisabeth Lucas and
Michael McCarthy as Executive Directors. Nicholas Fisher and Gavin Kaye, who had
a long association with Health Media Group plc, resigned upon the completion of
the reverse acquisition. I thank all my Board colleagues for their contribution
to the Company. I would also like to thank everyone at RWS for their support and
commitment during the most momentous year in the Company's history.
Outlook
Our order book is strong, as is our balance sheet. The Company will pursue a
blend of autonomous growth and acquisitions to further secure its leading
positions in its various markets. We expect to grow the dividend in line with
earnings and are committed to enhancing long term shareholder value. Your Board
believes that the key drivers are in place to enable the Company to deliver
these objectives and we face the future with confidence.
Andrew Brode
Executive Chairman
5 January 2005
RWS Holdings plc (formerly Health Media Group plc)
Preliminary Results 2004
Group Profit and Loss Account for the year ended 30 September 2004
--------------------------------------------------------------------------------
Year ended 6 months ended
30 September 2004 30 September 2003
---------------------------------------- ----------------------------------------
Before Before
goodwill Goodwill goodwill Goodwill
amortization amortization amortization amortization
and and and and
exceptional exceptional exceptional exceptional
items items Total Items Items Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Turnover
Continuing operations 31,095 - 31,095 14,207 - 14,207
Discontinued operations - - - 2,250 - 2,250
------- ------- ------- ------- ------- ------
3 31,095 - 31,095 16,457 - 16,457
------- ------- ------- ------- ------- ------
Cost of sales
Continuing operations (18,327) - (18,327) (8,095) - (8,095)
Discontinued operations - - - (1,182) - (1,182)
------- ------- ------- ------- ------- ------
(18,327) - (18,327) (9,277) - (9,277)
------- ------- ------- ------- ------- ------
Gross profit 12,768 - 12,768 7,180 - 7,180
Selling, general and
administrative expenses
Amortization of goodwill - (542) (542) - (271) (271)
Goodwill write-off 4 - (1,916) (1,916) - - -
Non-recurring costs
associated with the
flotation 4 - (297) (297) - (359) (359)
Other (7,143) - (7,143) (3,278) - (3,278)
------- ------- ------ ------- ------- ------
Continuing operations (7,143) (2,755) (9,898) (3,278) (630) (3,908)
Discontinued operations
- other - - - (1,405) - (1,405)
------- ------- ------ ------- ------- ------
(7,143) (2,755) (9,898) (4,683) (630) (5,313)
------- ------- ------ ------- ------- ------
Group operating profit
Continuing operations 5,625 (2,755) 2,870 2,834 (630) 2,204
Discontinued operations - - - (337) - (337)
------- ------- ------ ------- ------- ------
5,625 (2,755) 2,870 2,497 (630) 1,867
Loss on sale of subsidiary
undertakings 4 - (126) (126) - - -
------ ------
Profit on ordinary activities
before interest 2,744 1,867
Net interest 352 - 352 305 - 305
------- ------- ------ ------- ------- ------
Profit on ordinary activities
before taxation 5,977 (2,881) 3,096 2,802 (630) 2,172
Taxation 5 (1,884) 1,662 (222) (790) - (790)
------- ------- ------ ------- ------- ------
Profit on ordinary
activities after taxation 4,093 (1,219) 2,874 2,012 (630) 1,382
Attributable to minorities - - - - - -
------- ------- ------ ------- ------- ------
Net profit for the financial
period 4,093 (1,219) 2,874 2,012 (630) 1,382
(Profit attributable to
shareholders) ------- ------- ------- -------
Dividends 6 (1,890) (25,432)
------ ------
Profit/(loss) retained
for the financial period 9 984 (24,050)
------ ------
Earnings per Ordinary share 7
Basic earnings per share 12.2p 8.6p £52.09 £35.78
Diluted earnings per share 11.5p 8.1p £52.09 £35.78
All amounts relate to continuing activities in the year ended 30 September 2004
RWS Holdings plc (formerly Health Media Group plc)
Preliminary Results 2004
Group Balance Sheet at 30 September 2004
--------------------------------------------------------------------------------
2004 2003
--------------- ----------------
Note £'000 £'000 £'000 £'000
Fixed assets
Intangible assets 5,451 5,993
Tangible assets 585 728
Investments - 17,500
------ ------
6,036 24,221
Current assets
Work in progress 682 1,127
Debtors 5,217 5,534
Cash at bank 11,107 2,757
------ -------
17,006 9,418
Creditors:
amounts due within one year (10,400) (33,408)
------ -------
Net current
assets/(liabilities) 6,606 (23,990)
------ ------
Total assets less current
liabilities 12,642 231
Creditors:
amounts due after one year (33) (66)
Provisions for liabilities
and charges - (4,508)
------ -------
(33) (4,574)
------ ------
Net assets/(liabilities) 12,609 (4,343)
------ ------
Capital and reserves
Called up share capital 8/9 1,889 -
Share premium account 9 737 1,405
Share option reserve 9 2,030 -
Reverse acquisition reserve 9 (8,483) -
Profit and loss account 9 16,426 (5,748)
------ ------
Shareholders' funds/
(deficit)- equity interests 9 12,599 (4,343)
Non-equity minority interests 10 -
------ ------
Shareholders' funds/(deficit)
and minority interests 12,609 (4,343)
------ ------
RWS Holdings plc (formerly Health Media Group plc)
Preliminary Results 2004
Statement of Group Cash Flow for the year ended 30 September 2004
--------------------------------------------------------------------------------
Year ended 6 months ended
30 September 2004 30 September 2003
--------------- ----------------
Note £'000 £'000 £'000 £'000
Net cash inflow from
operating activities 10 5,265 1,711
Returns on investments and
servicing of finance
Interest received 570 369
Interest paid (75) (60)
------ -------
495 309
Tax (paid)/repaid (1,330) 541
Capital expenditure and
financial investment
Purchase of tangible fixed assets (210) (152)
Sale of tangible fixed assets 5 6
Redemption of loan notes 17,500 -
------ -------
17,295 (146)
Acquisitions and disposals
Overdraft transferred on
disposal of subsidiary 62 -
Acquisition related expenses
and other payments to third
parties on the reverse acquisition (1,693) -
------ -------
(1,631) -
Equity dividends paid to
shareholders 6 (567) -
Equity dividends paid to
shareholders of Bybrook Ltd (10,000) (500)
------ -------
(10,567) (500)
------ ------
Increase in cash 11 9,527 1,915
------ ------
RWS Holdings plc (formerly Health Media Group plc)
Preliminary Results 2004
Notes to the Accounts
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1 Basis of Consolidation and Presentation of Financial Information
The results have been prepared using accounting policies consistent with
those used in the preparation of the statutory accounts. The financial
information is derived from the Group financial statements for the year
ended 30 September 2004, and does not constitute full accounts within the
meaning of Section 240 of the Companies Act 1985. The Group financial
statements on which the auditors have given an unqualified report do not
contain a statement under Section 237(2) or (3) of the Companies Act, will
be delivered to the Registrar of Companies in due course and posted to
Shareholders in January. Copies of this announcement are available at the
registered office of the Company, 8 Baker Street, London W1U 3LL and at the
offices of the Company's nominated advisers, Collins Stewart Limited, 9th
Floor, 88 Wood Street, London EC2V 7QR and its public relations advisers,
Weber Shandwick Square Mile, Fox Court, 14 Gray's Inn Road, London WC1X 8WS
for a period of 14 days from the date hereof.
On 11 November 2003, the Company, then named Health Media Group plc ('HMG')
became the legal parent company of Bybrook Limited and its subsidiary
undertakings. The substance of the combination was that Bybrook Limited
acquired RWS Holdings plc in a reverse acquisition. As part of the
transaction HMG changed its name to RWS Holdings plc.
Under the requirements of the Companies Act 1985, it would be necessary for
the Company's consolidated accounts to follow the legal form of the
business combination - in that case the pre-combination results would be
those of HMG and its subsidiary undertakings, which would exclude Bybrook.
Bybrook's results would then be brought into the Group from 11 November
2003, being the date of the acquisition. However, this would portray the
combination as an acquisition of Bybrook by HMG and would, in the opinion
of the Directors, fail to give a true and fair view of the substance of the
business combination. Accordingly, the Directors have adopted reverse
acquisition accounting as a basis of consolidation in order to give a true
and fair view of the substance of the combined entity. In invoking the true
and fair override, the Directors note that reverse acquisition accounting
is endorsed under International Financial Reporting Standard 22 and that
the Urgent Issues Task Force of the UK's Accounting Standards Board
considered the subject and concluded that there are instances where it is
right and proper to invoke the true and fair override in such a way.
As a consequence of applying reverse acquisition accounting, the results
for the year ended 30 September 2004 comprise the results of Bybrook for
its year ended 30 September 2004, plus those of HMG from 11 November
2003.
Goodwill arose on the difference between the fair value of HMG's share
capital and fair value of its net liabilities at the reverse acquisition
date. This goodwill has been written-off in the year ended 30 September
2004, because HMG has no continuing business and therefore this goodwill
has no intrinsic value. Other goodwill arising on consolidation and
purchased goodwill are capitalised and amortized through the Profit and
Loss Account over the Directors' estimate of its useful economic life that
does not exceed 20 years.
In line with statutory reporting requirements, the comparatives in these
financial statements are the figures in the audited accounts of Bybrook
Limited for the six months ended 30 September 2003. The comparatives
incorporate the financial statements of Bybrook Limited and all its
subsidiary undertakings made up to 30 September 2003. The acquisition
method of accounting was used with the results of subsidiary undertakings
being included from the date of acquisition. The comparatives include the
results of the now demerged loss making sub-group, Brooklet Limited (the
holding company of, inter alia, RWS Group LLC). Disclosures in relation to
this were contained in the Circular to Shareholders issued on 10 October
2003.
--------------------------------------------------------------------------------
2 Accounting policies
Intangible fixed assets
On acquisition of a business, fair values are attributed to the net assets
acquired. Goodwill arises where the fair value of the consideration given
for a business exceeds the fair value of such net assets. Goodwill arising
on acquisitions is capitalised and amortized through the Profit and Loss
Account over the Directors' estimate of its useful economic life (generally
not exceeding 20 years). Goodwill is reviewed for impairment when there are
indications that the carrying value may not be recoverable.
Other purchased goodwill is capitalised and amortized through the Profit
and Loss Account over the Directors' estimate of the useful economic life.
The economic life for each asset within this category is considered
individually and is not normally expected to exceed 20 years.
--------------------------------------------------------------------------------
3 Segment information
Year ended 6 months ended
30 September 2004 30 September 2003
£'000 £'000
Turnover by class of business
Translation and localization services
- continuing 28,448 12,699
Translation and localization services
- discontinued - 2,250
Information services 2,647 1,508
----------- -----------
31,095 16,457
----------- -----------
The tables below show information by geographic area and, for turnover and
tangible fixed assets, material countries
Turnover by geographic location of Group undertaking
United Kingdom 27,597 12,756
Continental Europe 481 201
Japan 2,711 1,116
United States of America 306 2,384
----------- -----------
31,095 16,457
----------- -----------
Turnover by geographic market in which
customers are located
United Kingdom 4,583 2,463
Continental Europe
Germany 10,501 4,873
France 3,062 1,455
Other 7,105 3,116
----------- -----------
20,668 9,444
Japan 1,678 572
United States of America 4,050 3,858
Other 116 120
----------- -----------
31,095 16,457
----------- -----------
Total assets by location of Group undertaking
UK 21,868 32,731
Others 1,174 908
----------- -----------
23,042 33,639
----------- -----------
Net operating assets by location of Group undertaking
UK 11,762 (5,004)
Others 847 661
----------- -----------
Net assets 12,609 (4,343)
----------- -----------
Profit before taxation by business sector and location of Group undertaking
In the opinion of the Directors, disclosure would be seriously prejudicial
to the interests of the Group.
--------------------------------------------------------------------------------
4 Exceptional items, non-recurring costs and charges
Goodwill write-off
On 11 November 2003, Bybrook Limited completed its reverse acquisition of
Health Media Group plc which then changed its name to RWS Holdings plc.
Goodwill arising on the reverse acquisition represents Health Media Group plc's
share capital of 462,095 Ordinary shares at the placing price of 112.54p plus
5,753,082,252 Deferred shares at nominal value of 0.1p plus acquisition
expenses less the fair value of Health Media Group plc net liabilities
acquired. However, the rights of the Deferred shares which were not listed or
quoted on any stock exchange were minimal, thereby rendering them effectively
valueless. With the sanction of an order of the High Court of Justice dated 15
September 2004, the capital of the Company was reduced by cancelling the
Deferred shares for no consideration.
£'000
Cost of the acquisition 520
Acquisition related expenses 1,069
--------
Total consideration 1,589
Add: fair value of Health Media Group plc's net liabilities acquired
Current assets
Debtors 18
Cash 1
--------
19
Current liabilities
Trade creditors 10
Accruals 336
--------
327
--------
Goodwill 1,916
--------
This goodwill has been written-off in the year ended 30 September 2004, because
Health Media Group plc had no continuing business.
Non-recurring costs associated with the flotation
The Group incurred £297,000 (6 months to 30 September 2003 - £359,000) of
non-recurring expenses associated with the flotation which have been
written-off to Profit and Loss Account. No significant tax effect arises from
these items.
Disposal of subsidiary undertakings with operations based in California
On 7 October 2003, Bybrook Limited sold the entire share capital of
subsidiaries with operations based in California to its shareholders for a
consideration of £500. The terms of this agreement were set out in the
Admission Document sent to Shareholders on 10 October 2003. A loss of £126,000
arose on the demerger of this sub-group.
--------------------------------------------------------------------------------
Year ended 6 months ended
5 Taxation 30 September 2004 30 September 2003
£'000 £'000
Analysis of tax charge:
Corporation tax 1,691 723
Adjustments in respect of prior periods - 26
Overseas taxation 193 41
-------- --------
1,884 790
Exceptional tax credit (see note below) (1,662) -
-------- --------
Total current tax charge 222 790
-------- --------
Certain overseas trading losses in prior years within the Bybrook group were
available for group relief but had not been allowed for in deriving the tax
charge in prior periods. The quantum has now been agreed and the effect (£1.66
million) is recognised in the Profit and Loss Account.
The Group has estimated capital losses of £20 million available for offset
against the capital gain arising on the redemption of loan notes in the period.
As the quantum of the capital losses has not been agreed the offset of the
capital losses has not been recognised in the current tax charge.
--------------------------------------------------------------------------------
Year ended 6 months ended
6 Dividends 30 September 2004 30 September 2003
--------------------- -------------------
Pence
per share £'000 £ per share £'000
On each 1p Ordinary and 1p
'A' Ordinary share
Interims, paid on 11 November 2003 - - 658.43 25,432
On each 5p Ordinary share
Interim, paid on 12 July 2004 1.5 567 - -
Final proposed 3.5 1,323 - -
-------- -------- -------- --------
5.0 1,890 658.43 25,432
-------- -------- -------- --------
In respect of the 6 months ended 30 September 2003, the directors of
Bybrook Limited declared interim dividends of £25.4 million. These were
conditional on the reverse acquisition being completed and the admission to
AIM. The relevant conditions were met on 11 November 2003. Of the total,
£10 million or £258.90 per share was a pre-flotation dividend and the
balance was payable to the Group's new holding company, RWS Holdings plc,
post flotation.
Subject to approval by shareholders at the Annual General Meeting, the
proposed final dividend will be paid on 7 March 2005 to shareholders on the
register at close of business on 28 January 2005.
--------------------------------------------------------------------------------
7 Earnings per Ordinary share
Earnings per share are based on the group profit for the year and a
weighted average of 33,590,041 Ordinary shares in issue during the year (6
months ended 30 September 2003 - 38,625). Bybrook's results, shown as the
Group's comparatives in these financial statements, include losses from
localization operations in the United States that were demerged before the
reverse takeover.
Year ended 6 months ended
30 September 2004 30 September 2003
----------------- -----------------
Earnings EPS Earnings EPS
£'000 Pence £'000 £
Basic earnings 2,874 8.6 1,382 35.78
Goodwill amortization and
exceptional items, non-recurring
costs and charges 2,881 8.5 630 16.31
-------- -------- -------- -------
5,755 17.1 2,012 52.09
Exceptional tax credit from
prior year trading losses (1,662) (4.9) - -
-------- -------- -------- -------
Adjusted earnings 4,093 12.2 2,012 52.09
-------- -------- -------- -------
No significant tax effect arises from the adjustment for goodwill and exceptional items.
Year ended 6 months ended
30 September 2004 30 September 2003
Number of shares Number of shares
Diluted earnings per share are based on the
group profit for the period and a weighted
average of Ordinary shares in issue during
the period calculated as follows:
In issue 33,590,041 38,625
Dilutive potential Ordinary shares arising
from unexercised share options 2,040,730 -
---------- --------
35,630,771 38,625
---------- --------
The weighted average number of ordinary shares in issue reflects that the
equivalent of only 462,095 Ordinary shares were in issue for the period
from the beginning of the financial year until 11 November 2003. At the
year end there were unexercised options over a total of 4,533,857 Ordinary
shares.
A reconstruction occurred in the year details of which are in notes 1 and 8.
--------------------------------------------------------------------------------
8 Share capital 2004 2003
£'000 £'000
Authorised
40,000,000 Ordinary shares of 25p - 10,000
100,000,000 Ordinary shares of 5p 5,000 -
-------- ---------
5,000 10,000
-------- ---------
Allotted, called up and fully paid
23,104,748 Ordinary shares of 25p - 5,776
37,782,158 Ordinary shares of 5p 1,889 -
-------- ---------
1,889 5,776
-------- ---------
Prior to the reverse takeover, trading in the Company's Ordinary shares had been
suspended and at that time they were trading at a discount. To enable the
acquisition proposals to be effected, the Company restructured its capital. This
reorganisation consisted of a conversion of each then existing Ordinary share of
25p each into one Ordinary share of 0.1p and 249 Deferred shares of 0.1p each, a
consolidation of every 50 Ordinary shares of 0.1p each into one Ordinary share of
5p, and, a capital reduction. The net effect of the capital reorganisation was
that every holder of 50 Ordinary shares of 25p each received one Ordinary share of
5p.
The details of the acquisition of Bybrook Limited were contained in the Circular
to Shareholders accompanying the last Annual Report. The capital reorganisation
with the exception of the proposed capital reduction, the admission to trading on
AIM of the enlarged share capital, and the change of name of the Company were all
completed on 11 November 2003. The capital reduction was completed and registered
by Companies House on 16 September 2004.
The share capital balance in the Group Balance Sheet at 30 September 2003 reflects
that of Bybrook Limited prior to the reverse acquisition. This represented 29,625
allotted, called up and fully paid Ordinary shares of 1p each and 9,000 allotted,
called up and fully paid 'A' Ordinary shares of 1p each.
--------------------------------------------------------------------------------
9 Reconciliation of shareholders' funds and movements on reserves
Reverse
acquisition
Share and share Profit and
Share premium option loss Shareholders'
capital account reserves account funds/(deficit)
£'000 £'000 £'000 £'000 £'000
Group
At beginning of year - 1,405 - (5,748) (4,343)
Dividend from Bybrook
Limited - - - 15,432 15,432
-----------------------------------------------------------
- 1,405 - 9,684 11,089
Shares held by existing
HMG shareholders 5,776 737 - - 6,513
Shares issued to Bybrook
shareholders 1,866 - - - 1,866
Adjustments arising on
the reverse acquisition - (1,405) (8,483) - (9,888)
Share options issued - - 2,030 - 2,030
Capital reduction (5,753) - - 5,753 -
Profit retained for
the financial year - - - 984 984
Exchange movements - - - 5 5
-----------------------------------------------------------
At end of year 1,889 737 (6,453) 16,426 12,599
-----------------------------------------------------------
At 30 September 2004 the Reverse Acquisition Reserve amounted to £(8,483,000) and
the Share Option Reserve amounted to £2,030,000. Both arose during the year.
A dividend of £15,432,000 was received by the Company from Bybrook Limited on 11
November 2003. This dividend was conditional on the reverse acquisition being
completed and the Company being admitted to AIM so it had not been previously
recognised by the Company but it had been included in dividends payable in the
subsidiary's accounts for the six months ended 30 September 2003. Further details
are given in note 6.
The Deferred shares of the Company, which were not listed or quoted on any stock
exchange and had minimal rights thereby rendering them effectively valueless, were
cancelled for no consideration by means of a reduction of capital in September
2004.
The purchase consideration for the acquisition of Bybrook Limited valued Bybrook
at £44 million. This was satisfied by the issue to the vendors of Bybrook of
37,320,064 Ordinary shares in the Company which at the placing price had a fair
value of £42 million and the issue of options over 2,266,930 Ordinary shares of 5p
each to Executive Directors and Senior Executives. The Share Option Reserve
amounting to £2,030,000 relates to these options.
--------------------------------------------------------------------------------
10 Reconciliation of operating profit to net cash flow from
operating activities
Year ended 6 months ended
30 September 2004 30 September 2003
£'000 £'000
Group operating profit 2,870 1,867
Depreciation and amortization 2,737 432
Profit on sale of tangible fixed assets (1) (1)
Work in progress decrease/(increase) 445 (386)
Debtors decrease/(increase) 171 (701)
Creditors (decrease)/increase (883) 512
Other non-cash movements (74) (12)
----------- -----------
Net cash inflow from operating
activities 5,265 1,711
----------- -----------
--------------------------------------------------------------------------------
11 Reconciliation of net cash flow to movement in net funds
Year ended 6 months ended
30 September 2004 30 September 2003
£'000 £'000
Increase in cash in the year 9,527 1,915
Net funds/(debt) at beginning of the year 1,211 (704)
---------- -----------
Net funds at end of year 10,738 1,211
---------- -----------
--------------------------------------------------------------------------------
12 Post balance sheet events
The Company issued and allotted 377,821 new Ordinary shares of 5p each
pursuant to the exercise of an option by its nominated adviser, Collins
Stewart Limited. The option was granted to Collins Stewart Limited at the
time of the Company's admission to AIM in November 2003 and represented an
option over 1% of the Company's issued share capital at the time of
flotation. The new shares were placed with institutional shareholders.
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