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TG21 Plc (TGP)

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Friday 21 September, 2007

TG21 Plc

Adoption of IFRS

TG21 Plc
21 September 2007


21 September 2007


                TG21 plc ('TG21', 'the Company' or 'the Group')

        Adoption of International Financial Reporting Standards ('IFRS')



INTRODUCTION


As required by the AIM Rules for Companies and European Union Law, the Company
will prepare its consolidated financial statements under International Financial
Reporting Standards ('IFRS') with effect from 1 January 2007. Previously the
Company has applied United Kingdom Generally Accepted Accounting Principles ('UK
GAAP'). The first financial statements that will be prepared for the Group under
IFRS will be the unaudited interim results for the six months to 30 June 2007
followed by the audited financial statements for the year ending 31 December
2007. These financial statements will include IFRS restated 2006 comparative
figures and, consequently, the transition date for the Group's adoption of IFRS
is 1 January 2006.


The key changes for the Group are:


   •Non-amortisation of goodwill from 1 January 2006
   •Inclusion of a deferred tax charge in respect of the property revaluation
    as at 1 January 2006
   •Reversal of the hindsight adjustment made to goodwill in the year ended
    31 December 2006
   •Full recognition of the total deferred tax asset arising on decelerated
    capital allowances at 1 January 2006
   •Inclusion of interest rate swap agreements and forward currency contracts
    in the balance sheets at their fair value
   •Balance sheet reclassification of computer software and website
    development costs to intangible assets


The net impact of these changes is that for the year ended 31 December 2006 the
Group's profit after minority interest increased from £1,000 to £400,000 (EPS up
from 0p to 0.49p).


This document sets out the following:


   •A commentary on the key issues arising from the adoption of IFRS
   •The Group's accounting policies under IFRS
   •The opening IFRS consolidated balance sheet as at 1 January 2006 for the
    Group reconciled to the previously published UK GAAP balance sheet at this
    date
   •The IFRS balance sheet as at 31 December 2006 for the Group reconciled to
    the previously published UK GAAP balance sheet at this date
   •The IFRS consolidated income statement for the six months ended 30 June
    2006 reconciled to the previously published UK GAAP consolidated income
    statement for the same period
   •The IFRS consolidated income statement for the year ended 31 December
    2006 reconciled to the previously published UK GAAP consolidated income
    statement for the same period


Standards currently in issue and adopted by the EU may be subject to change.
Additionally, IFRS is currently being applied in the UK and in a large number of
other countries almost simultaneously for the first time, and practice is
continuing to evolve. Therefore, at this preliminary stage, the full financial
effect of reporting under IFRS as it will be applied and reported on in the
Group's first IFRS financial statements for the six months ended 30 June 2007
and for the year ended 31 December 2007 may be subject to change.


During the assessment of the impact of IFRS on the Group and the preparation of
this Press release the Company has consulted with its auditors, but these
numbers are unaudited.


A copy of this document will be available from the Company's website at
www.tg21plc.com.


For Further Information:

TG21 plc                               Wilson Jennings        020 8710 4000
                                       Finance Director
Hogarth Partnership Limited            Barnaby Fry            020 7357 9477
                                       Sarah Richardson
Daniel Stewart & Co plc (Nomad)        Graham Webster         020 7776 6550


COMMENTARY ON THE KEY ISSUES


First time adoption of IFRS (IFRS 1)


IFRS 1 requires that IFRS is applied retrospectively to establish the Group's
balance sheet at the date of transition, 1 January 2006, unless a permitted
exemption is applied. The exemptions adopted by the Group are set out below:


   •Not to apply IFRS 3 Business Combinations to business combinations that
    occurred before 1 January 2006
   •Under IAS 16 Property, plant and Equipment an entity must adopt either a
    cost or valuation model for valuing its property, plant and equipment. The
    Group has elected to use the previous revaluation of its property as deemed
    cost at the transition date
   •Not to apply IFRS 2 Share-based Payments to share-based payments granted
    before 7 November 2002 (Note that under UK GAAP the Group adopted FRS 20
    Share-based payments in its financial statements for the year ended 31
    December 2006 and no adjustment is required on the adoption of IFRS 2.)


Description of IFRS adjustments


The following commentary describes the differences between IFRS and UK GAAP that
have a material impact on the income or net assets of the Group. The adjustments
that result from these differences are set out in the Appendices which contain
detailed reconciliations of previously reported results under UK GAAP to
restated results under IFRS.


Intangible assets (IAS 38)


(a)     Goodwill


Under UK GAAP, goodwill arising on the acquisition of businesses after 22
December 1988 was amortised on a straight line basis over its estimated useful
economic life of 10 years. On transition to IFRS on 1 January 2006, amortisation
ceased to be charged. Instead annual reviews of goodwill are performed to test
for potential impairment. Therefore, although it may be possible to carry
goodwill for longer than the normal maximum amortisation period of 20 years
under UK GAAP, there is the potential for increased volatility to be introduced
to the income statement by way of impairment charges if the forecast cash flows
are not sufficient to support the carrying value.


Impairment tests have been carried out for goodwill at 1 January 2006 and 31
December 2006 and have shown that there was no impairment.


The impact of this on profit before tax for the year ended 31 December 2006 and
net assets at 31 December 2006 is an increase of £576,000 due to the reversal of
the amortisation charge for that year.


Under UK GAAP in 2006 we made a hindsight adjustment to the carrying value of
goodwill of £173,000 - no such adjustment is allowed under IFRS and so this has
been reversed resulting in a charge of £173,000 in the year to 31 December 2006.


(b)     Computer software and website development costs


Computer software, which is not an integral part of a related item of hardware,
and website development costs are required under IFRS to be treated as
intangible assets. Under UK GAAP, all such software was included in tangible
fixed assets. The amounts reclassified to intangible assets are £439,000 at 1
January 2006 and £352,000 at 31 December 2006 in respect of computer software
and £45,000 at both dates in respect of website development costs. In the income
statement for the year ended 31 December 2006 the depreciation on these assets
will be reclassified as intangible amortisation with no overall impact on
reported profits.


(c)     Research and development


Under IAS 38, development costs must be capitalised as intangible assets if they
satisfy certain specified criteria. There is no impact of this on the Group's
profit before tax for the year ended 31 December 2006 and net assets at 31
December 2006, but the Group's accounting policies have been changed to
accommodate the possibility of some development costs being capitalised under
IAS 38 in the future.


Deferred tax (IAS 12)


IAS 12 Income Taxes requires deferred tax to be provided on temporary
differences between the tax base and the carrying value of assets and
liabilities rather than just taxable timing differences under UK GAAP. As a
result, the Group's opening IFRS balance sheet at 1 January 2006 and the balance
sheet at 31 December 2006 include an additional deferred tax liability of
£626,000 relating to the revaluation of the property which it was anticipated
previously would be rolled over into a replacement property.


At 31 December 2005 and 31 December 2006, under UK GAAP the Group recognised
£100,000 as a deferred tax current asset in respect of decelerated capital
allowances being the amount that was estimated would reverse in the following 12
months. The unrecognised deferred tax asset (estimated to fall due after 12
months) was £155,000 at 31 December 2005 and £156,000 at 31 December 2006. This
previously unrecognised deferred tax asset in respect of decelerated capital
allowances has been recognised in the IFRS financial statements. This has
resulted in an increase in the deferred tax asset of £155,000 in the Group's
opening IFRS balance sheet at 1 January 2006 which is increased by a further
£1,000 in the balance sheet at 31 December 2006.


Financial instruments (IAS 39)


IAS 39 Financial Instruments: Recognition and Measurement requires all
derivative financial instruments to be included in the balance sheet at fair
value and contains provisions which restrict the use of hedge accounting. Under
UK GAAP estimated fair values were included in the financial statements by way
of note only. In the opinion of the directors hedge accounting cannot be applied
by the Group in respect of its interest rate swaps and forward exchange rate
purchases and consequently changes in fair value have been reported through the
income statement. At 1 January 2006 the fair value of the Group's currency and
interest swap financial interests result in the creation of a current liability
of £24,000 which is increased to £29,000 at 31 December 2006.


Cash flow statement


There are no material adjustments to the cash flow statement previously
presented under UK GAAP arising from identified IFRS adjustments.


IFRS ACCOUNTING POLICIES


The Group's accounting policies under IFRS are set out below:



Basis of preparation

The financial statements are prepared in accordance with International Financial
Reporting Standards and IFRIC interpretations and with those parts of the
Companies Act, 1985 applicable to companies reporting under IFRS. The financial
statements have been prepared under the historical cost convention as modified
by the revaluation of available for sale investments, financial assets and
liabilities held for trading. A summary of the more important Group accounting
policies is set out below.


The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results may differ from those
estimates. The significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty were:


(i) Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in
use of the cash generating units to which goodwill has been allocated. The value
in use calculation requires the Group to estimate future cash flows expected to
arise from the cash generating unit at a suitable discount rate in order to
calculate the present value.


(ii) Share based payments


In determining the fair value of equity settled share based payments and the
related charge to the income statement, the Group makes assumptions about future
events and market conditions. In particular, judgement must be made as the
likely number of shares that will vest, and the fair value of each award
granted. The fair value is determined using a valuation model which is dependent
on further estimates, including the Group's future dividend policy, employee
turnover, the timing with which options will be exercised and the future
volatility in the price of the Group's shares. Such assumptions are based on
publicly available information and reflect market expectations and advice taken
from qualified personnel. Different assumptions about these factors to those
made by the Group could materially affect the reported value of share based
payments.


Basis of consolidation

The consolidated income statement and balance sheet include the financial
statements of the Company and entities controlled by the Company (its subsidiary
undertakings) made up to 31 December each year. Control is achieved where the
Company has the power to govern the financial and operating policies of an
investee entity so as to obtain benefits from its activities. The acquisition of
subsidiaries is accounted for using the purchase method. The results of
subsidiaries sold or acquired are included in the consolidated income statement
up to, or from, the date control passes. Intra-Group sales and profits are
eliminated fully on consolidation.


Minority interests have been disclosed separately from the Group's profit and
shareholders' equity and stated as a separate item.


Associates

An associate is an entity over which the Group is in a position to exercise
significant influence, but not control or joint control, through participation
in the financial and operating policy decisions of the investee. Associated
undertakings are accounted for using the equity method. The consolidated income
statement includes the Group's share of the associates' profits less losses,
where appropriate, while the Group's share of the net assets of the associates
are shown on the consolidated balance sheet. Any unamortised balance of goodwill
is included in the carrying value of the investment in associates. On
acquisition, the Group's share of the associates' assets and liabilities are
recorded at fair values reflecting their condition at that date. Where these
fair values are provisional, adjustments are made where deemed appropriate in
the hindsight period which is the first full year after acquisition.


Goodwill

Goodwill arising on acquisitions prior to 22 December 1998 was written off
immediately against reserves. Goodwill arising on acquisitions between 23
December 1998 and 31 December 2005 was capitalised, classified as an asset on
the balance sheet and amortised on a straight line basis over its useful
economic life of 10 years. From 1 January 2006 goodwill is recognised as an
intangible asset and reviewed for impairment at least annually. Any impairment
is recognised immediately in the income statement and may not be subsequently
reversed. Goodwill previously eliminated has not been reinstated on
implementation of IAS 38


On disposal of a subsidiary or business, the attributable goodwill is included
in the determination of profit or loss on disposal.


Turnover

Turnover represents amounts invoiced to customers, net of value added tax and
trade discounts. Turnover from sales of equipment is recognised on delivery to
the customer. Where the sale of equipment includes installation, the turnover is
recognised once the installation has been completed. Turnover also includes
income from the granting of distribution rights. Turnover is accounted for on
the date that the rights transfer to the third party.


Taxation

Income tax on profit or loss for the year comprises current and deferred tax.
Income tax is recognised in the income statement except to the extent that it
relates to items recognised directly in equity, in which case it is recognised
in equity.


Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantially enacted at the balance sheet date, and
any adjustment to tax payable in respect of previous years.


Deferred tax is provided using the balance sheet liability method on any
temporary differences between the carrying amounts for financial reporting
purposes and those for taxation purposes. The amount of deferred tax provided is
based on the expected manner of realisation or settlement of the carrying amount
of assets and liabilities.


A deferred tax asset is recognised only to the extent that it is probable that
sufficient taxable profit will be available to utilise the temporary difference.


Earnings per ordinary share

Basic earnings per share ('EPS') is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average number of ordinary
shares in issue during the year.

For diluted earnings, the weighted average number of ordinary shares in issue is
adjusted to assume conversion of all dilutive potential ordinary shares.


Fixed asset investments

Investments in Group undertakings are stated at cost less any provision for
impairment. The carrying values of fixed asset investments are reviewed for
impairment in periods if events or changes in circumstances indicate the
carrying value may not be recoverable.

Property, plant and equipment

The cost of tangible fixed assets is their purchase price or, in the case of
property included at its valuation prior to the adoption of IFRS, the revalued
amount is taken as deemed cost.

Depreciation is calculated so as to write off the cost or valuation of tangible
fixed assets on a straight line basis to their estimated residual values over
the expected useful economic lives of the assets concerned. Periodic reviews are
made of estimated remaining useful lives and residual values and the
depreciation rates applied are:

                                                           %
Freehold buildings                                         2
Motor vehicles                                            25
Plant and equipment                                    20-33


Assets under construction are not depreciated until they come into use. Freehold
land is not depreciated.

Impairment

Assets that have an indefinite useful life are not subject to amortisation and
are tested for impairment. Assets that are subject to amortisation or
depreciation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If any
such condition exists, the recoverable amount of the asset is estimated in order
to determine the extent, if any, of the impairment loss. Where the asset does
not generate cash flows that are independent from other assets, estimates are
made of the cash flows of the cash generating unit to which the asset belongs.


Recoverable amount is the higher of fair value, less costs to sell, and value in
use. In assessing value in use, estimated future cash flows are discounted to
their present value using a discount rate appropriate to the specific asset or
cash generating unit and by comparing the internal rate of return generated by
the cash flows to target return rates established by management.


If the recoverable amount of an asset or cash generating unit is estimated to be
less that its carrying amount, the carrying value of the asset or cash
generating unit is reduced to its recoverable amount. Impairment losses are
recognised immediately in the income statement.


In respect of assets other than goodwill, an impairment loss is reversed if
there has been a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent that the asset's
carrying amount does not exceed the carrying amount that would have been
determined net of depreciation or amortisation, if that impairment loss had not
been recognised. Impairment losses in respect of goodwill are not reversed.


Intangible assets

Software, trademarks and patents which can be separately identified are
capitalised as intangible assets at cost of acquisition and amortised over their
estimated useful economic lives of between 3 and 20 years. Intangible assets
acquired as part of a business combination are stated in the balance sheet at
their fair value at the date of acquisition and amortised over their estimated
useful lives.


Research and development

Expenditure on research is written off in the period in which it is incurred.

Development expenditure is capitalised where it relates to a specific project
where technical feasibility has been established, adequate technical, financial
and other resources exist to complete the project, the expenditure attributable
to the project can be measured reliably and overall project profitability is
reasonably certain. In this case, it is recognised as an intangible asset and
amortised over its useful economic life. All other development expenditure is
recognised as an expense in the period in which it is incurred.


Inventories

Stock is stated at the lower of cost and net realisable value. Cost comprises
direct materials and, where applicable, direct labour costs and those overheads
that have been incurred in bringing the inventories to their present location
and condition. Where necessary, provision is made for obsolete, slow moving and
defective stocks.

Work in progress is valued at the cost of work completed on contracts in hand,
net of provisions.


Cash and cash equivalents

Cash and cash equivalents comprises cash balances and call deposits with
maturity of less than or equal to three months.


Financial instruments


Derivative financial instruments

The Group's activities expose it to the financial risks of changes in foreign
currency exchange rates and interest rates. The Group uses foreign exchange
forward contracts and interest rate swap contracts to hedge these exposures.
These financial instruments are included in the balance sheet as assets or
liabilities at their fair values. The Group does not use derivative financial
instruments for speculative purposes but its financial instruments do not
qualify for hedge accounting and consequently changes in their fair values are
recognised in the income statement as they arise.


Bank borrowings

Interest-bearing bank loans and overdrafts are recorded at the proceeds
received, net of direct issue costs. Direct issue costs are amortised over the
period of the bank facility, other finance charges including interest are
accounted for on an accrual basis in the income statement in the period in which
they are incurred.


Trade receivables and trade payables

Trade receivables and trade payables are measured at initial recognition at fair
value, and are subsequently measured at amortised cost using the effective
interest rate method. Appropriate allowances for estimated irrecoverable trade
receivables are recognised in the income statement when there is objective
evidence that the asset is impaired.


Leasing and hire purchase commitments

Assets held under finance leases, which are leases where substantially all the
risks and rewards of ownership of the asset are passed to the Group, and hire
purchase contracts are capitalised in the balance sheet and are depreciated over
their useful lives. The capital elements of future obligations under leases and
hire purchase contracts are included as liabilities in the balance sheet. The
interest elements of the rental obligations are charged in the income statement
over the duration of the leases and hire purchase contracts and represent a
constant proportion of the balance of capital repayments outstanding.

Rentals payable under operating leases are charged in the income statement on a
straight line basis over the lease term.


Pensions

The Group operates a defined contribution scheme. The pension cost charge to the
income statement is the contributions payable to the pension scheme for the
period.


Foreign currencies

Transactions in foreign currencies are recorded at the rate ruling at the date
of the transaction or at the contracted rate if the transaction is covered by a
forward currency contract. Monetary assets and liabilities denominated in
foreign currencies are retranslated at the rate of exchange ruling at the
balance sheet date or if appropriate at the forward contract rate. All
differences are taken to the income statement.

Share- based payments

Share options granted after 7 November 2002 are measured at their fair value at
the date of grant using a Black Scholes model. The fair value determined at the
grant date is expensed on a straight line basis over the vesting period, based
upon the Group's estimate of participants eligible to receive shares at the
point of vesting.


Impact of standards not yet effective

The International Accounting Standards Board has issued a number of
international financial reporting standards which are effective for future
accounting periods of the Group. The directors do not anticipate that the
adoption of any of these would make a material impact on these financial
statements.


                                   Appendices


APPENDIX 1

IFRS RECONCILIATION

IFRS Transition date consolidated balance sheet as at 1 January 2006

                   UK GAAP in          IAS          IAS         IAS 12      IAS 12    IAS 39  Restated
                                        38           12       Deferred    Deferred               Under
                  IFRS format Reclassifica Reclassifica tax asset full      tax on Financial      IFRS 
                                     -tion        -tion      provision revaluation      Ins-
                                        of           of                    surplus  truments               
                                intangible       Income                             
                                    assets        taxes

                        £'000        £'000        £'000          £'000       £'000     £'000     £'000
Non-current
assets
Goodwill                4,850            -            -              -           -         -     4,850
Other intangible            -          484            -              -           -         -       484
assets
Property, plant         4,645        (484)            -              -           -         -     4,161
and equipment
Deferred tax                -            -          100            155           -         -       255
asset
                        9,495            -          100            155           -         -     9,750
----------------     --------     --------     --------       --------    --------  --------  --------

Current assets
Inventories             3,799            -            -              -           -         -     3,799
Trade and other         6,771            -        (100)              -           -         -     6,671
receivables
Cash and cash           
equivalents             1,525            -            -              -           -         -     1,525
----------------     --------     --------     --------       --------    --------  --------  --------
                       12,095            -        (100)              -           -         -    11,995
----------------     --------     --------     --------       --------    --------  --------  --------

Total assets           21,590            -            -            155           -         -    21,745

Current
liabilities
Trade and other       (6,856)            -            -              -           -         -   (6,856)
payables
Tax liabilities         (159)            -            -              -           -         -     (159)
Bank overdrafts       (1,850)            -            -              -           -         -   (1,850)
and loans
Derivative                  
financial            
instruments                 -            -            -              -           -      (24)      (24)
----------------     --------     --------     --------       --------    --------  --------  --------
                      (8,865)            -            -              -           -      (24)   (8,889)
----------------     --------     --------     --------       --------    --------  --------  --------
Net current assets      3,230            -        (100)              -           -      (24)     3,106

Non-current
liabilities
Bank loans            (3,468)            -            -              -           -         -   (3,468)
Deferred tax               
liabilities                 -            -            -              -       (626)         -     (626)
----------------     --------     --------     --------       --------    --------  --------  --------
                      (3,468)            -            -              -       (626)         -   (4,094)
---------------      --------     --------     --------       --------    --------  --------  --------
Total liabilities    (12,333)            -            -              -       (626)      (24)  (12,983)
----------------     --------     --------     --------       --------    --------  --------  --------
Net assets              9,257            -            -            155       (626)      (24)     8,762
================     ========     ========     ========       ========    ========  ========  ========

Equity
Share capital           8,169            -            -              -           -         -     8,169
Share premium          12,110            -            -              -           -         -    12,110
account
Other reserve              43            -            -              -           -         -        43
Revaluation             1,378            -            -              -           -         -     1,378
reserve
Retained earnings    (12,665)            -            -            155       (626)      (24)  (13,160)
----------------     --------     --------     --------       --------    --------  --------  --------
Equity                  9,035            -            -            155       (626)      (24)     8,540
attributable to
shareholders

Minority interest         222            -            -              -           -         -       222
in equity
----------------     --------     --------     --------       --------    --------  --------  --------
Total equity            9,257            -            -            155       (626)      (24)     8,762
================     ========     ========     ========       ========    ========  ========  ========




APPENDIX 2A

IFRS RECONCILIATION

Consolidated balance sheet as at 31 December 2006 - Net assets

               UK GAAP in     IAS 38    IAS 38    IAS 38     IAS 12      IAS 12      IAS 12    IAS 39  Restated
              IFRS format   Reclass-  Reversal  Reversal    Reclass-   Deferred    Deferred Financial     Under
                           ification   of Good-  of hind- ification   tax asset   tax on re-   instru-     IFRS
                           of intang-     will     sight  of income   full prov-  valuation     ments
                                ible  Amortis-    adjust-     taxes       ision     surplus
                              assets     ation      ment
--------------   --------  ---------  --------  --------  ---------    --------    --------  --------  --------
                    £'000      £'000     £'000     £'000      £'000       £'000       £'000     £'000     £'000
Non-current
assets
Goodwill            4,447          -       576     (173)          -           -           -         -     4,850
Other                   -        397         -         -          -           -           -         -       397
intangible
assets
Property, plant     4,600      (397)         -         -          -           -           -         -     4,203
and equipment
Deferred tax            -          -         -         -        100         156           -         -       256
asset            
--------------   --------  ---------  --------  --------  ---------    --------    --------  --------  --------
                    9,047          -       576     (173)        100         156           -         -     9,706
--------------   --------  ---------  --------  --------  ---------    --------    --------  --------  --------
Current assets                                                                                  
Inventories         3,114          -         -         -          -           -           -         -     3,114
Trade and other     4,662          -         -                (100)           -           -         -     4,562
receivables
Cash and cash         745          -         -         -          -           -           -         -       745
equivalents     
--------------   --------  ---------  --------  --------  ---------    --------    --------  --------  --------
                    8,521          -         -         -      (100)           -           -         -     8,421
--------------   --------  ---------  --------  --------  ---------    --------    --------  --------  --------
Total assets       17,568          -       576     (173)          -         156           -         -    18,127

Current
liabilities
Trade and other   (4,302)          -         -         -          -           -           -         -   (4,302)
payables
Tax liabilities         -          -         -         -          -           -           -         -         -
Bank overdrafts   (2,032)          -         -         -          -           -           -         -   (2,032)
and loans
Derivative              -          -         -         -          -           -           -      (29)      (29)
financial       
instruments
--------------   --------  ---------  --------  --------  ---------    --------    --------  --------  --------
                  (6,334)          -         -         -          -           -                  (29)   (6,363)
--------------   --------  ---------  --------  --------  ---------    --------    --------  --------  --------
Net current         2,187          -         -         -      (100)           -           -      (29)     2,058
assets
Non-current
liabilities
Bank loans        (1,989)          -         -         -          -           -           -         -   (1,989)
Deferred tax            -          -         -         -          -           -       (626)         -     (626)
liabilities     
--------------   --------  ---------  --------  --------  ---------    --------    --------  --------  --------
                  (1,989)          -         -         -          -           -       (626)         -   (2,615)
--------------   --------  ---------  --------  --------  ---------    --------    --------  --------  --------
Total             (8,323)          -         -         -          -           -       (626)       (29)   (8,978)
liabilities      
--------------   --------  ---------  --------  --------  ---------    --------    --------  --------  --------
Net assets          9,245          -       576     (173)          -         156       (626)       (29)    9,149
==============   ========  =========  ========  ========  =========    ========    ========  ========  ========





APPENDIX 2B

IFRS RECONCILIATION

Consolidated balance sheet as at 31 December 2006 - Equity



               UK GAAP in     IAS 38    IAS 38    IAS 38     IAS 12    IAS 12    IAS 12    IAS 39  Restated
                     IFRS   Reclass-  Reversal  Reversal   Reclass-  Deferred  Deferred Financial     Under
                   format  ification   of Good   of hind- ification     asset   on re-     instru-    IFRS
                           of intang-     will     sight  of income      full valuation     ments
                                able     Amort-   adjust-     taxes provision   surplus
                              assets   isation      ment
                    £'000      £'000     £'000     £'000      £'000     £'000     £'000     £'000     £'000
Equity
Share capital       8,169          -         -         -          -         -         -         -     8,169

Share premium       3,387          -         -         -          -         -         -         -     3,387
account

Special reserve     1,206          -         -         -          -         -         -         -     1,206

Other reserve          43          -         -         -          -         -         -         -        43

Revaluation         1,350          -         -         -          -         -         -         -     1,350
reserve
Retained          (4,954)          -       576     (173)          -       156     (626)      (29)   (5,050)
earnings         
--------------   --------  ---------  --------  --------  ---------  --------  --------  --------  --------
Equity
attributable to
shareholders        9,201          -       576     (173)          -       156     (626)      (29)     9,105

Minority               44          -         -         -          -         -         -         -        44
interest in
equity
--------------   --------  ---------  --------  --------  ---------  --------  --------  --------  --------
Total equity        9,245          -       576     (173)          -       156     (626)      (29)     9,149
==============   ========  =========  ========  ========  =========  ========  ========  ========  ========







APPENDIX 3

IFRS RECONCILIATION

Consolidated income statement for the six months ended 30 June 2006

                              UK GAAP in    IAS 38    IAS 38    IAS 39  Restated
                                    IFRS  Reversal     Hind- Financial     Under
                                  format  of Good-     sight    Instru-     IFRS
                                              will   adjust-     ments
                                            amort-      ment
                                           isation
                                   £'000     £'000     £'000     £'000     £'000
Continuing operations

Revenue                           17,403         -         -         -    17,403
Cost of sales                   (11,105)         -         -         -  (11,105)
----------------                --------  --------  --------  --------  --------
Gross profit                       6,298         -         -         -     6,298
Administrative expenses          (6,032)       288     (173)         -   (5,917)
----------------                --------  --------  --------  --------  --------
Group operating profit               266       288     (173)         -       381
Share of operating loss in             -         -         -         -         -
associate
----------------                --------  --------  --------  --------  --------
Profit from operations               266       288     (173)         -       381

Finance costs                      (234)         -         -       (3)     (237)
----------------                --------  --------  --------  --------  --------
Profit before tax                     32       288     (173)       (3)       144
Tax                                    -         -         -         -         -
----------------                --------  --------  --------  --------  --------
Profit for the period                 32       288     (173)       (3)       144
================                ========  ========  ========  ========  ========
Profit attributable to                15         -         -         -        15
minority interest

Profit attributable to equity         17       288     (173)       (3)       129
shareholders    
----------------                --------  --------  --------  --------  --------
                                      32       288     (173)       (3)       144
================                ========  ========  ========  ========  ========





APPENDIX 4

IFRS RECONCILIATION

Consolidated income statement for the year ended 31 December 2006


                    UK GAAP in    IAS 38    IAS 38   IAS 12     IAS 39  Restated
                          IFRS  Reversal     Hind- Deferred   Financial    Under
                        format  of Good-     sight    asset     Instru-     IFRS
                                    will    adjust-    full      ments
                                   amort-     ment      pro- 
                                 isation             vision
                         £'000     £'000     £'000     £'000     £'000     £'000
Continuing
operations

Revenue                 31,228         -         -         -         -    31,228

Cost of sales         (19,310)         -         -         -         -  (19,310)
----------------      --------  --------  --------  --------  --------  --------
Gross profit            11,918         -         -         -         -    11,918

Administrative        (11,403)       576     (173)         -         -  (11,000)
expenses
----------------      --------  --------  --------  --------  --------  --------
Group operating            515       576     (173)         -         -       918
profit

Share of operating        (60)         -         -         -         -      (60)
loss in associate
----------------      --------  --------  --------  --------  --------  --------
Profit from                455       576     (173)         -         -       858
operations

Finance costs            (427)         -         -         -       (5)     (432)
----------------      --------  --------  --------  --------  --------  --------
Profit before tax           28       576     (173)         -       (5)       426
Tax                          -         -         -         1         -         1
----------------      --------  --------  --------  --------  --------  --------
Profit for the              
period                      28       576     (173)         1       (5)       427
================      ========  ========  ========  ========  ========  ========
Profit attributable
to minority
interest                    27         -         -         -         -        27
Profit attributable
to equity
shareholders                 1       576     (173)         1       (5)       400
----------------      --------  --------  --------  --------  --------  --------
                            28       576     (173)         1       (5)       427
================      ========  ========  ========  ========  ========  ========






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